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Question
The expected return for the market is 12 percent, with a standard deviation of 20 percent. The expected risk-free rate is 8 percent. Information is available for three mutual funds, all assumed to be efficient, as follows:Mutual Funds SD(%)
Affiliated 15
Omega 17
Ivy 19
(a) Based on the CML, calculate the market price of risk.
(b) Calculate the expected return on each of these portfolios.
Answer
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