The market portfolio of the Tierra del Fuego stock market has an expected return of 22% and a standard deviation of returns of 19%. The risk-free rate is 7% (1) What is the equation of the Tierra del Fuego Capital Market Line? (4 pts) (2) Compute the weights, mean return, standard deviation, and Sharpe ratio for the following Capital Market Line (CML) portfolios. Hint: You can either use the above equation or use Goal Seek or Solver for this question. (18 pts) i. A portfolio composed of 35% risk-free asset. ii. A portfolio composed of 120% of the market portfolio. iii. A portfolio that yields a return of 15%. iv. A portfolio that yields a return of 23%. v. A portfolio with standard deviation of 35%. vi. A portfolio with standard deviation of 5%
The market portfolio of the Tierra del Fuego stock market has an expected return of 22% and a standard deviation of returns of 19%. The risk-free rate is 7% (1) What is the equation of the Tierra del Fuego Capital Market Line? (4 pts) (2) Compute the weights, mean return, standard deviation, and Sharpe ratio for the following Capital Market Line (CML) portfolios. Hint: You can either use the above equation or use Goal Seek or Solver for this question. (18 pts) i. A portfolio composed of 35% risk-free asset. ii. A portfolio composed of 120% of the market portfolio. iii. A portfolio that yields a return of 15%. iv. A portfolio that yields a return of 23%. v. A portfolio with standard deviation of 35%. vi. A portfolio with standard deviation of 5%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:The market portfolio of the Tierra del Fuego stock market has an expected return of 22% and a
standard deviation of returns of 19%. The risk-free rate is 7%
(1) What is the equation of the Tierra del Fuego Capital Market Line? (4 pts)
(2) Compute the weights, mean return, standard deviation, and Sharpe ratio for the following
Capital Market Line (CML) portfolios. Hint: You can either use the above equation or use Goal
Seek or Solver for this question. (18 pts)
i. A portfolio composed of 35% risk-free asset.
ii. A portfolio composed of 120% of the market portfolio.
iii. A portfolio that yields a return of 15%.
iv. A portfolio that yields a return of 23%.
v. A portfolio with standard deviation of 35%.
vi. A portfolio with standard deviation of 5%
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