Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets.E(Rp) 12.00 %Standard Deviation

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Your client, Bo Regard, holds a complete portfolio that consists of a portfolio of risky assets (P) and T-Bills. The information below refers to these assets.

E(Rp) 12.00 %

Standard Deviation of P 7.20 % T-Bill rate 3.60 %

Proportion of Complete Portfolio in P 80 % Proportion of Complete Portfolio in T-Bills 20 %

Composition of P:

Stock A 40.00 % Stock B 25.00 % Stock C 35.00 % Total 100.00 %

What is the equation of Bo's capital allocation line?

E(rC) = 7.2 + 3.6 * Standard Deviation of C

E(rC) = 0.2 + 1.167 * Standard Deviation of C

E(rC) = 3.6 + 1.167 * Standard Deviation of C

E(rC) = 3.6 + 12.0 * Standard Deviation of C

E(rC) = 3.6 + 0.857 * Standard Deviation of C

Giải thích

Chọn đáp án C

Giải thích: The intercept is the risk-free rate (3.60%) and the slope is (12.00% - 3.60%)/7.20% = 1.167.