The expected return of a portfolio that is totally invested in the risk free asset is caclculated as: E(R) = WA * E(RA) Wf * E(RB) = 0 * 0.16 1.0 * 0.08 = 0 0.08 = 0.08 or 8% Therefore the expected return of a portfolio with risk free asset is 8% There is no standard deviation for the risk free asset. Please full Explain Suppose that a fund that tracks the S&P has mean E(RM) = 16% and standard deviation OM = 10%,and suppose that the T-bill rate Re=8%. Answer the following questions about efficient portfolios:a) What is the expected return and standard deviation of a portfolio that has 50% of its wealth inthe risk-free asset and 50% in the S&P?

Standard Deviation is mesaure the risk which is involved in earning the return from the stock. Lower…

Answered: Suppose that a fund that tracks the S&P…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 9PROB

See similar textbooks

Related questions

Question

The expected return of a portfolio that is totally invested in the risk free asset is caclculated as: E(R) = WA * E(RA) Wf * E(RB) = 0 * 0.16 1.0 * 0.08 = 0 0.08 = 0.08 or 8% Therefore the expected return of a portfolio with risk free asset is 8% There is no standard deviation for the risk free asset.

Please full Explain

Suppose that a fund that tracks the S&P has mean E(RM) = 16% and standard deviation OM = 10%,
and suppose that the T-bill rate Re=8%. Answer the following questions about efficient portfolios:
a) What is the expected return and standard deviation of a portfolio that has 50% of its wealth in
the risk-free asset and 50% in the S&P?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions