Efficient portfolios are complete portfolios that contain the risk-free asset and the market portfolio. You would like to hold an efficient portfolio from the set of portfolios below, include the T-bills with a beta equal to 1.5. One of the portfolios below is most likely to be the market portfolio. The risk-free rate of return is 2% annually. What is the standard deviation of this efficient portfolio? Portfolio E(R) Standard Deviation X 19% 30% Y 4% 5% Z 10% 15% W 15% 20%
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Efficient portfolios are complete portfolios that contain the risk-free asset and the market portfolio. You would like to hold an efficient portfolio from the set of portfolios below, include the T-bills with a beta equal to 1.5. One of the portfolios below is most likely to be the market portfolio. The risk-free
|
Portfolio |
E(R) |
Standard Deviation |
|
X |
19% |
30% |
|
Y |
4% |
5% |
|
Z |
10% |
15% |
|
W |
15% |
20% |
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