Question

Help Save 6 Eur Iyour portfolio is allocated 34 to the market portfolio and 1410 Treasury bels, then you expect to receive Multiple Choice 75% of the expected return on the market 25 of the streerate pus of the expectatik premium О the strate plus 78 of the expected retrisk premium о the tree rate us fexpected return on the marvel

Answer 1

Rf is the risk free rate

Rm is the market return

(Rm - Rf) is the market risk premium, is excess market return over the risk free rate

We have invested 25% in T bills and 75% in market portfolio

Hence investor return

= 0.25 Rf + 0.75Rm

(Adding and Subtracting Rf from the second addition part

= 0.25 Rf + 0.75 (Rf + Rm - Rf)

= 0.25 Rf + 0.75 Rf + 0.75 (Rm- Rf)

= 1 Rf + 0.75(Rm-Rf)

= Risk Free Rate + 75% market risk premium

Correct option c