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Home Q & A Board Other Fields Homework Help Business Finance
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Memphic Memphic
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6 years ago
Assuming that Tom wants to maintain the current volatility of his portfolio, then the maximum expected return that Tom could achieve by investing in the market portfolio and risk-free investment is closest to:
A) 13%
B) 15%
C) 16%
D) 12%
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
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wrote...
#1
6 years ago
B
Explanation:  B) SD(RxCML) = xSD(RMkt)

.25 = x(.18) → x = .25/.18 = 1.39

E[RxCML] = rf + x(E[RMkt] - rf)

E[RxCML] = .04 + 1.39(.12 - .04) = .1512
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