Problem 6.4. Aasir can invest his money in risk-free asset and/or in a stock S....
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Problem 6.4. Aasir can invest his money in risk-free asset and/or in a stock S. The riskfree asset provides a guaranteed return of 4%. The stock S provides expected return of 12% with volatility of 50%. If Aasir wants to limit his standard deviation to no more than 30%, what is the highest expected return he can earn? If Aasir wants an expected return of at least 15%, what is the minimum possible volatility of his portfolio? Assume Aasir can short any asset and can invest more than 100% in any asset
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