EC3333 MidTermPaper2009Fall - EC3333 NATIONAL UNIVERSITY OF...

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EC3333 NATIONAL UNIVERSITY OF SINGAPORE EC3333 FANANCIAL ECONOMICS I: MID-TERM (SEMESTER I : AY2009-2010) Time Allowed: 1.5 Hours INSTRUCTIONS TO CANDIDATES 1. This examination paper contains 4 questions and comprises 5 printed pages including this front page. 2. Answer all questions. 3. Total marks are 25 . 4. Use answer papers to answer questions. Write down your Matriculation Number, Name and Tutorial Group Number on your answer paper. 5. This is an OPEN BOOK examination.
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EC3333 2 1. (5 marks) There are two assets that are available for an investor to construct his portfolio: a risky asset with an expected return of 5-percent and a standard deviation of 3-percent, and a risk-free T-bill that delivers a 3-percent return. (a) Using the above information, draw the Capital Allocation Line, and write down the expression for the Capital Allocation Line. (1 mark) (b) Suppose the investor invests 50 percent of his/her wealth in the risky asset and 50 percent in the T-bill. What are the expected return
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EC3333 MidTermPaper2009Fall - EC3333 NATIONAL UNIVERSITY OF...

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