Every investor in the capital asset pricing model owns a combination of the mark

Question

Every investor in the capital asset pricing model owns a combination of the market portfolio & a riskless asset. Assume that the standard deviation of the market portfolio is 30% and that the expected return on the portfolio is 15%. What proportion of the following investor's wealth would you suggest investing in the market portfolio and what proportion in the riskless asset? (The Riskless asset has an expected return of 5%)

a. An investor who desires a portfolio with no standard dev

b. An investor who desires a portfolio with a standard dev of 15%

c. An investor who desires a portfolio with a standard dev of 30%

d. An investor who desires a portfolio with a standard dev of 45%

e. An investor who desires a portfolio with a standard dev 12%

Explanation / Answer

Answer :

(d) An investor who desires a portfolio with a standard deviation of 45%

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.