Computing expected return and standard deviation portfolio

Reference no: EM1315418

Computing expected return and standard deviation of portfolio

Suppose that a fund that tracks S&P500 has the mean E(Rm) = 16% and the standard deviation σM = 10%, and suppose that the T-Bill rate Rf = 80%. Answer the following questions about efficient portfolios:

(a) What is the expected return and standard deviation of a portfolio that is totally invested in the risk-free asset?

(b) 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?

(c) What is the expected return and standard deviation of a portfolio that has 125% of its wealth in the S&P, financed by borrowing 25% 0f its wealth at the risk-free rate?

(d) What are the weights for investing in the risk-free asset and the S&P that produce a standard deviation for the entire portfolio that is twice the standard deviation of the S&P? what is the expected return value on that portfolio?

Reference no: EM1315418

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