Assume that the expected rate of return on the market portfolio is 23% and the rate of return on T-bills (the risk-free rate) is 5%. The standard deviation of the market return is 25%. Assume that the market portfolio is efficient.
(Key-in your answers in decimal format and keep4 decimal places to your answers.)
What is the slope of the capital market line _____________
If an efficient asset has expected return of 17.6%, what is the standard deviation of this asset? If you have $5,000 to invest, how much should you allocate it to market portfolio and the risk-free respectively in order to achieve the above return?
Standard deviation: ____________
Allocation to market ($): ____________
Allocation to risk-free asset ($): __________
If you borrow $3,000 at the risk-free rate and invest $18,000 in the market portfolio, how much money should you expect to have at the end of the year
Expected value ($): ___________