Risk and return measures for two portfolios


The following table shows risk and return measures for two portfolios

Portfolio Average Annual Standard Beta
Rate of Return Deviation

Fund A 12% 10% 0.25
S&P 500 index 16% 12% 1.0
T-bills 8% 0 0

a. Plot fund A, the market portfolio and risk-free asset on a graph relative to the SML. Is the fund correctly priced? Explain why.

b. Plot fund A, the market portfolio and risk-free asset on a graph relative to the CML. Between fund A and the market portfolio, which one is more efficient in terms of its sharp ratio?

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Finance Basics: Risk and return measures for two portfolios
Reference No:- TGS050515

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