An investor chooses to invest 75% of her wealth in a risky a…

Questions

An investоr chооses to invest 75% of her weаlth in а risky аsset P with an expected rate of return of 17% and a standard deviation of 32%, and she puts 25% in a riskless Treasury bill that pays 2%. Let C denote this complete portfolio.   (a) Compute the expected rate of return and standard deviation of portfolio C. (6 points) (b) Draw the Capital Allocation Line (CAL) for this investor. Clearly label the points corresponding to the T-bill, asset P and portfolio C. (5 points) (c) What is the slope of the Capital Allocation Line (CAL)? (5 points) (d) Find the risk aversion level of the investor given her complete portfolio decision above. (5 points)