Risky Assets and Portfolio Choice

Measuring a risky asset

The portfolio line

Choosing the tangency

Applications of the line

Riskless 3 percent, risky mean 9 percent, half of wealth in each. What is the portfolio's expected return?

Same half-half portfolio with risky deviation 18 percent. What is its standard deviation?

With riskless 3, market mean 9, market deviation 18, what is the slope of the risk budget line and what does it say?

An investor puts 150 percent of wealth in the risky asset, borrowing 50 percent at the riskless rate. Where does she sit?

With market deviation 18 percent, compute the portfolio deviation at risky share 0.25, and write the number in percent.

Same share, riskless 3 and risky mean 9, compute the portfolio mean in percent, and write the number.

An investor puts her whole wealth in the risky asset, risky share of 1. What are the portfolio's mean and deviation?

With risky share 0.75, what does the portfolio deliver?

An investor borrows half her wealth at the riskless rate to hold 150 percent in the risky asset. What are the portfolio's statistics?

Along the whole portfolio line, what stays constant as the risky share changes?

With riskless 3 and risky mean 9 percent, compute the portfolio mean at risky share 0.75, and write the number in percent.

With risky deviation 18 percent, compute the portfolio deviation at risky share 1.5, and write the number in percent.