Given an optimal risky portfolio with expected return of 12%, standard deviation of 26%, and a risk free rate of 3%, what is the slope of the best feasible CAL?
A) 0.64
B) 0.14
C) 0.08
D) 0.35
E) 0.36

Question

Quizplus · Accepted Answer

The slope of the best feasible CAL is equal to the Sharpe ratio, which is calculated as (Expected return - Risk-free rate) / Standard deviation. In this case, the Sharpe ratio is (12% - 3%) / 26% = 0.35.

Given an Optimal Risky Portfolio with Expected Return of 12