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Find capital market line

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Reference no: EM133061311

Portfolios AAA and BBB as shown in the table below lies very close to the Capital Market Line (CML)

Portfolio

Average Annual Rate of Excess Return %

Standard Deviation of Excess Return %

ASX200 Index Fund

6.00

20.0

AAA

5.00

18.0

BBB

9.00

23.0
  1. You are choosing one of the three portfolios by considering the Sharpe Ratio, Treynor Ration and Jensen-Alpha. Briefly discuss which one you would choose to optimise risk-adjusted return. Justify your choice by providing evidence using suitable performance measurement
  2. Briefly discuss two limitations of your choice in (a)
  3. In light of your answer in (b) provide a better alternative portfolio evaluation index. Provide justifications for your choice
  4. You are going to combine portfolio AAA and portfolio BBB to form a portfolio CCC. Without doing any calculation, do you expect there will be any improvement in portfolio CCC in Sharpe Ratio, Treynor Ratio and Jensen-Alpha?

Please note this is a practice question for final exam of AFIN352

Reference no: EM133061311

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