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    Optimal Investment: Risks and Expected Return

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    Given the following

    RF = 5% p.a.
    RM = 12% p.a.
    RiskM = 10% p.a.

    Describe how Jenny might optimally invest $1,000,000 in a portfolio of financial assets to earn an expected return of 14% p.a. and determine the risk that she would face in doing so. State all necessary assumptions.

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    Solution Preview

    Refer to attached file.

    Given the following

    RF = 5% p.a.
    RM = 12% p.a.
    M = 10% p.a.

    Describe how Jenny might optimally invest $1,000,000 in a portfolio of financial assets to earn an expected return of 14% p.a. and determine ...

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    With formulas and good explanation, the solution shows how to answer the problem, and provides an answer.

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