Your investment portfolio consists of $10,000 shares of Dell. The expected return on Dell is 11%,...

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Your investment portfolio consists of $10,000 shares of Dell.The expected return on Dell is 11%, with a standard deviation(volatility) of 43%. Suppose the risk-free rate is 4%, the expectedreturn on the market is 9% and the volatility of the market is18%.
a) Find a portfolio on the Capital Market Line has the sameexpected return as Dell. What is the volatility of that portfolio?What mix of the market portfolio and the risk-free asset would giveyou that portfolio?
b) Find a portfolio on the Capital Market Line has the samevolatility as Dell. What is the expected return on that portfolio?What mix of the market portfolio and the risk-free asset would giveyou that portfolio?
c) Plot the capital market line, Dell, and the two portfoliosthat you identified above.
d) Plot the securities market line. If CAPM holds, based on theabove information, what must be Dell’s beta? Plot Dell on theSML.

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4.5 Ratings (1002 Votes)

Average return from Capital market line is give byEr RmWm 1WmRfWhereEr expected rate of of return dells return11Rm 9Wm weight to the market portfolio in capital market lineRf risk free See Answer

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Your investment portfolio consists of $10,000 shares of Dell.The expected return on Dell is 11%, with a standard deviation(volatility) of 43%. Suppose the risk-free rate is 4%, the expectedreturn on the market is 9% and the volatility of the market is18%.a) Find a portfolio on the Capital Market Line has the sameexpected return as Dell. What is the volatility of that portfolio?What mix of the market portfolio and the risk-free asset would giveyou that portfolio?b) Find a portfolio on the Capital Market Line has the samevolatility as Dell. What is the expected return on that portfolio?What mix of the market portfolio and the risk-free asset would giveyou that portfolio?c) Plot the capital market line, Dell, and the two portfoliosthat you identified above.d) Plot the securities market line. If CAPM holds, based on theabove information, what must be Dell’s beta? Plot Dell on theSML.