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%?© BrainMass Inc. brainmass.com October 10, 2019, 4:01 am ad1c9bdddf
Recall the following formula for portfolio variance of two assets:
portfolio variance = (sd1)^2*(weight1)^2 + (sd2)^2*(weight2)^2 + ...
Portfolio theory is examined. How someone should invest $100000 if you are only willing to accept a total portfolio risk of 8%.