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Your complete portfolio is $400,000 and is comprised of a risk free asset that pays 5% and a risky asset that has an expected return of 9% and a standard deviation of 20%.

a. If you invest $240,000 in the risky asset what is the expected return and standard deviation for your complete portfolio?
b. Your risky asset is a portfolio that includes 3 stocks in the following proportions:
Stock A: 40% Stock B: 50% Stock C 10%
What are the investment proportions of your complete portfolio, including your position in the risk-free asset?
c. What is the Sharpe ratio of your portfolio?
d. What is the variance of the risk free asset and the variance of the risky asset?
e. Draw the CAL.
f. What is the best point to be at on the CAL?
g. What would you have to do to earn an expected return of 10%? Be specific in your answer.
h. If the returns of the risky portfolio are normally distributed, what is the probability of returns being less than 29%?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M942082

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