Using the formula for the capital market line (Formula 21-5),if the risk-free rate (R_F)is 6%,the market rate of return (K_M)is 12%,the market standard deviation ($\sigma$_M)is 11%,and the standard deviation of the portfolio ($\sigma$_P)is 14%,compute the anticipated return of the portfolio (K_P).

Question

Quizplus · Accepted Answer

The capital market line formula is $ K_P = R_F + \frac{(K_M - R_F)}{\sigma_M} \times \sigma_P $. Plugging in the values: $ K_P = 6\% + \frac{(12\% - 6\%)}{11\%} \times 14\% = 13.64\% $.

Using the Formula for the Capital Market Line (Formula 21-5),if σ\sigmaσ

Using the Formula for the Capital Market Line (Formula 21-5),if $\sigma$