Assume that the expected rate of return on the market portfolio is 23% and the rate of,return on T-bills (the risk-free rate) is 7%. The standard deviation of the market is 32%.,Assume that the market portfolio is efficient.,1. What is the equation of the capital market line?,2. (a) If an expected return of 39% is desired, what is the standard deviation of the,corresponding portfolio?,(b) If you have $100 to invest, how should you allocate it to achieve the above,portfolio?,3. If you invest $300 in the risk-free asset and $700 in the market portfolio, how much,money should you expect to have at the end of the year?
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