Year Risk free rate (%) Return_risk-free asset 2011 4.51 - 2012 3.11   2013 2.61   2014 2.75   2015 2.34   2016 1.78   2017 1.77   2018 2.02   2019 0.90   2020 0.02   Average     Calculate return on risk free asset and its average and assume: Average (Return on Risky Portfolio) 3.86% Standard deviation (Risky Portfolio) 10.56% Expected Return (Complete Portfolio) 7% Solve for the proportions of y and (1-y) such that:  E(Rc)=Rf+y[E(rp)-rf]) = 7%

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
Problem 1PS
icon
Related questions
Question
Year Risk free rate (%) Return_risk-free asset
2011 4.51 -
2012 3.11  
2013 2.61  
2014 2.75  
2015 2.34  
2016 1.78  
2017 1.77  
2018 2.02  
2019 0.90  
2020 0.02  
Average    

Calculate return on risk free asset and its average and assume:

Average (Return on Risky Portfolio) 3.86%
Standard deviation (Risky Portfolio) 10.56%
Expected Return (Complete Portfolio) 7%

Solve for the proportions of y and (1-y) such that: 

E(Rc)=Rf+y[E(rp)-rf]) = 7%

Expert Solution
steps

Step by step

Solved in 4 steps with 2 images

Blurred answer
Knowledge Booster
Risk and Return
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education