Using the information provided in the pictures: Let’s assume, you want to construct a portfolio of risky and riskfree assets. You wish to generate a 7% return for your complete portfolio E(rc). Using the Capital Allocation Line (CAL) equation - E(rc) = rf + y(E(Rp) - rf) a. Calculate the portion that you need to invest in risky assets and (b). in risk-free assets. c. Calculate the standard deviation of the portfolio.
Using the information provided in the pictures: Let’s assume, you want to construct a portfolio of risky and riskfree assets. You wish to generate a 7% return for your complete portfolio E(rc). Using the Capital Allocation Line (CAL) equation - E(rc) = rf + y(E(Rp) - rf) a. Calculate the portion that you need to invest in risky assets and (b). in risk-free assets. c. Calculate the standard deviation of the portfolio.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Using the information provided in the pictures: Let’s assume, you want to construct a portfolio of risky and riskfree
assets. You wish to generate a 7% return for your complete portfolio E(rc). Using the Capital Allocation
Line (CAL) equation - E(rc) = rf + y(E(Rp) - rf)
a. Calculate the portion that you need to invest in risky assets and (b). in risk-free assets.
c. Calculate the standard deviation of the portfolio.
Transcribed Image Text:Year
Risk free rate (%)
Return_risk-free asset
2011
5.03
2012
4.51
-0.102985
2013
3.11
-0.309484
2014
2.61
-0.163052
2015
2.75
0.055662
2016
2.34
-0.150000
2017
1.78
-0.238503
2018
2019
1.77
-0.005618
2.02
0.141243
2020
0.90
-0.554455
Average
-9.66%
Transcribed Image Text:Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Average
ASX 300 Index
ASX 300 Dividend Yield (%) Return_risky portfolio
4760.79
3.76
4052.27
4.93
-0.147788
4626.27
4.33
0.142718
5304.8
3.99
0.147531
5348.93
4.24
0.009118
5249.09
4.72
-0.017783
5617.73
4.09
0.071008
6023.3
4.04
0.072914
5596.96
4.48
-0.070038
6647.74
3.95
0.188447
6574.33
2.82
-0.010619
3.86%
Standard deviation
10.56%
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