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Unformatted text preview: 4. Consider a risky portfolio, A, with an expected rate of return of 0.15 and a standard deviation of 0.15, that lies on a given indiﬀerence curve. Which one of the following portfolios might lie on the same indiﬀerence curve? A. E(r) = 0.15; Standard deviation = 0.20 B. E(r) = 0.15; Standard deviation = 0.10 C. E(r) = 0.10; Standard deviation = 0.10 D. E(r) = 0.20; Standard deviation = 0.15 E. E(r) = 0.10; Standard deviation = 0.20 5. You invest $100 in a risky asset with an expected rate of return of 0.12 and a standard deviation of 0.15 and a T-bill with a rate of return of 0.05. What is the slope of the Capital Allocation Line formed with the risky asset and the risk-free asset? Suppose A = 4, what the optimal amount of investment on the risky asset? Does the investor have to leverage? How about when A = 1? 1...
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- Spring '11