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problem: Assume that a fund that tracks S&P500 has the mean E(Rm) = 16 percent & the standard deviation σM = 10 percent, and assume that the T-Bill rate Rf = 80 percent. Answer the given problems about efficient portfolios:

[A] find out the expected return and standard deviation of a portfolio that has 125 percent of its wealth in the S&P, financed by borrowing 25% 0f its wealth at the risk-free rate?

[B] find out the weights for investing in the risk-free asset and the S&P that produce a standard deviation for the entire portfolio that is twice the standard deviation of the S&P? Determine the expected return value on that portfolio?

[C] find out the expected return and standard deviation of a portfolio that is totally invested in the risk-free asset?

[D] find out the expected return and standard deviation of a portfolio that has 50% of its wealth in the risk-free asset and 50 percent in the S&P?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919147

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