Use These Data For The Following Questions You Manage A Risky Portfolio With Expecte 1206037

Use these data for the following questions:

You manage a risky portfolio with expected rate of return of 18%and standard deviation of 28%. The T-bill rate (lending rate) is 8%and borrowing rate is 10%. Your clientA????1s degree of risk aversion isA = 3.5.

a.Draw the CAL (capital allocation line with different borrowingand lending rates) on an expected return-standard deviationdiagram.

b.Calculate the Sharpe-Ratio (reward-to-variability ratio) ofthe risky portfolio assuming you can borrow and lend at the samerate, 8% .

c.What proportion, y, of the total investment should be investedin your fund?

d.   What is theexpected return and standarddeviation of the rate of return on your clientA????1s optimizedportfolio?   

Prof. Angela


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