FINS2624 Lecture Notes - Lecture 5: Expected Return
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5 – Optimal Portfolios
Expected return of risk free asset = variation of risk free asset = 0
Return of complete portfolio, C:
• Fraction invested in risk-free asset = (1-y)
Expected return of complete portfolio, C:
Risk of a complete portfolio:
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Related Questions
Asset W has an expected return of 10.4 percent and a beta of 1.25. If the risk-free rate is 3.2 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Round your expected return answers to 2 decimal places. (e.g., 32.16) and beta answers to 3 decimal places. (e.g., 32.161))
Percentage of Portfolio in Asset W | Portfolio Expected Return | Portfolio Beta | |||
0 | % | % | |||
25 | % | ||||
50 | % | ||||
75 | % | ||||
100 | % | ||||
125 | % | ||||
150 | % | ||||
If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Round your answer to 2 decimal places. (e.g., 32.1616)) |
Slope of the line | % |