Given that the risk-free rate is 5%, the expected return on the market portfolio is 20%, and...

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Given thatthe risk-free rate is 5%, the expected return on the marketportfolio is 20%, and the standard deviation of returns to themarket portfolio is 20%, answer the followingquestions:
You have $100,000 to invest. How should you allocate yourwealth between the risk free asset and the market portfolio inorder to have a 15% expected return?
What is the standard deviation of your portfolio in (a)?
Now suppose that you want to have a portfolio, whichpays 25% expected return. What is the weight in the risk free assetand in the market portfolio?
What do these weights mean: What are you doing with therisk free asset and what are you doing with the marketportfolio?
What is the standard deviation of the portfolio inc?
What is your conclusion about the effect of leverage onthe risk of the portfolio?

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Answer a Let us assume amount invested in risk free asset A Hence A 5 100000 A 20 100000 15 5A 20000 20 A 15000 15A 15000 20000 5000 A 5000 15 3333333 As such Allocation to risk free asset 3333333 13rd of 100000 Allocation to market 100000 3333333 6666667 23rd of See Answer

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Given thatthe risk-free rate is 5%, the expected return on the marketportfolio is 20%, and the standard deviation of returns to themarket portfolio is 20%, answer the followingquestions:You have $100,000 to invest. How should you allocate yourwealth between the risk free asset and the market portfolio inorder to have a 15% expected return?What is the standard deviation of your portfolio in (a)?Now suppose that you want to have a portfolio, whichpays 25% expected return. What is the weight in the risk free assetand in the market portfolio?What do these weights mean: What are you doing with therisk free asset and what are you doing with the marketportfolio?What is the standard deviation of the portfolio inc?What is your conclusion about the effect of leverage onthe risk of the portfolio?