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What is the expected return and standard deviation

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Suppose that a mutual fund that tracks the S&P has mean E(Rm) = 16% and standard deviation σm = 10%, and suppose that the T-bill rate Rf = 8%. Answer the following questions:

(a) What is the expected return and standard deviation of a portfolio that is 100% invested in the risk-free asset?

(b) What is the expected return and standard deviation of a portfolio that is 50% invested in the risk-free asset and 50% in the mutual fund?

(c) What is the expected return and standard deviation of a portfolio that is 125% invested in the mutual fund, financed by borrowing 25% at the risk-free rate?

(d) What are the portfolio weights that produce a standard deviation equal to twice the standard deviation of the mutual fund? What is the expected return on that portfolio?

Reference no: EM132142247

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