describe expected returns and risk in portfolio.
Presume the expected return as well as the standard deviation on the Market Portfolio M are E (RM) = 12% and σM = 20%, respectively.
1) When the Sharpe Ratio for the market portfolio is 0.5 and what risk-free rate Rf is the market anticipate? Depict on a diagram for the Capital Market Line derived from the above data. Make sure to clarify the intercept as well as the slope.
2) What must be the expected return of a well-diversified portfolio P (that is portfolios on the ML) with a volatility of 15%?
3) Suppose portfolio P has a standard deviation of 10% as well as an expected return of 6.5%. Is this portfolio efficient?
4) What must be the standard deviation of an efficient portfolio with a beta of 0.4? describe