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    Portfolio Theory

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    Assume that the risk free rate of return is 3% and the market portfolio on the capital market line (CML) has an expected return of 11% and a standard deviation of 14%. How should you invest $100 000 if you are only willing to accept a total portfolio risk of 8%?

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    https://brainmass.com/economics/risk-analysis/portfolio-theory-on-risk-446418

    Solution Preview

    Recall the following formula for portfolio variance of two assets:

    portfolio variance = (sd1)^2*(weight1)^2 + (sd2)^2*(weight2)^2 + ...

    Solution Summary

    Portfolio theory is examined. How someone should invest $100000 if you are only willing to accept a total portfolio risk of 8%.

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