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Sagot :
Answer:
A. portfolio that has an expected outcome of $114 can be form by borrowing the amount of $46 at the risk-free rate and investing the total amount ($146) in the risky asset.
B. 0.3095
Explanation:
A. Calculation for How would you form a portfolio that has an expected outcome of $114
Portfolio expected outcome = $100: (114 - 100)/100 = 14%
Portfolio expected outcome =0.14 = w1(0.11) + (1 - w1)(0.045)
Portfolio expected outcome=0.14 = 0.11w1 + 0.045 - 0.045w1
Portfolio expected outcome=0.095 = 0.065w1
w1 = 1.46($100)
Portfolio expected outcome= $146
Portfolio expected outcome=(1 - w1)$100 = -$46.
Therefore based on the above calculation portfolio that has an expected outcome of $114 can be form by borrowing the amount of $46 at the risk-free rate and investing the total amount ($146) in the risky asset.
B. Calculation for the slope of slope of the Capital Allocation Line formed with the risky asset and the risk-free asset
Slope of the Capital Allocation Line=(0.11 - 0.045)/0.21
Slope of the Capital Allocation Line= 0.3095.
Therefore the slope of slope of the Capital Allocation Line formed with the risky asset and the risk-free asset is 0.3095
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