Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 2. (15 points) assume that the risk-free rate is 1

2. (15 points) Assume that the risk-free rate is 1%. Consider the following CAPM parameter...

60.1K

Verified Solution

Question

Finance

image
2. (15 points) Assume that the risk-free rate is 1%. Consider the following CAPM parameter values: Portfolio Expected return Beta A 15% 1.5 B 0.4 Market 13.5% 1 Assume in addition, that the market portfolio has a volatility of 20%. Each of portfolio A and B have an unsystematic variance of 0.0036 (a) (3 points) What is the equation for the SML of this economy? (b) (2 points) What are the alphas of portfolio A and B? Page 2 of 10 N1553E Theory of Investment () (4 points) What is the equation for the CAL using the T-bills and an equally weighted portfolio of A and B? (d) (3 points) What is the equation for the CML? Assuming the market portfolio is already the optimal risky portfolio (e) (3 points) What is the weight of the optimal risky portfolio in an investor's complete optimal portfolio? Assuming the investor's risk aversion A = 10, and his complete portfolio comprises the optimal risky portfolio and T-bills

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students