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Corporate Financial ManagementProblem Set 6Autumn Term 201611.Capital Market Line (CML)The market portfolio has an expected return of 12% and a standard deviation of 10%. Therisk-free rate is 5%.a)What is the expected return on a well-diversified portfolio with a standarddeviation of 7%?b)What is the standard deviation of a well-diversified portfolio with an expectedreturn of 20%?2.Portfolio Theory and CAPMYour investment portfolio consists of £30,000 invested in only one stock–Alpha. Supposethe risk-free rate is 2%, Alpha stock has an expected return of 15% and a volatility of 30%,the expected market risk premium is 8% and the market portfolio has a volatility of 16%.Under the CAPM assumptions,(i) What alternative investment has the lowest possible volatility while having the same expected return as Alpha? What is the volatility of this investment?