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Find the standard deviation of the investor new portfolio

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Reference no: EM132818068

(a) Consider a mutual fund Z that invests 30% of its assets in the risk-free asset and 70% in stock A that has an expected return of 7% and a standard deviation equal to 10%. The risk-free rate equals 3%.

An investor has a target rate of return equal to 18%. Show this can be achieved by borrowing the risk-free asset and investing in mutual fund Z.

(b) Find the standard deviation of the investor's new portfolio.

Reference no: EM132818068

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