Transcribed Image Text
The risk-free rate is 1% while the expected return and standarddeviation of the market portfolio (S&P500) are 9% and 19%, respectively.(a) What is the standard deviation ofa combination of risk-free security and S&P 500 that has anexpected return of 12%? What is itsprobability of loss? Assume that the S&P 500 returns havea normal probability distribution.(b) The optimal allocation to S&P500 for an investor is 60%. What will be the optimal allocationtoS&P 500 for this investor if thestandard deviation of S&P 500 returns were to increase to25%?
Other questions asked by students
Accounting
Biology
Accounting
Accounting
Accounting
Finance