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What is the maximum expected return

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Richard Hendricks just received a new round of funding for his startup and is considering investment alternatives to save back some of his salary in case his company fails. Richard dropped out of college, so he asks you to help him evaluate the following portfolios.

Portfolio

I

N

C

U

B

A

T

R

Expected Return (%)

7

9

10

13

14

15

15

17

Volatility (%)

20

18

22

26

26

29

32

38

After discussing Richard's preferences, you conclude that he can tolerate a standard deviation of 22%, what is the maximum expected return 

Now suppose that in addition to the eight risky portfolios above Richard can borrow and lend at a risk free interest rate of 2% thanks to some special connections he has with Raviga Capital. Which of the risky portfolios is best when taking into consideration this additional opportunity?

Reference no: EM133074460

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