Question: Assume that a fund that tracks S&P500 has the mean E(Rm) = 16 percent & the standard deviation σM = 10 percent, and assume that the T-Bill rate Rf = 80 percent. Answer the given questions about efficient portfolios:
[A] Calculate the expected return and standard deviation of a portfolio that has 125 percent of its wealth in the S&P, financed by borrowing 25% 0f its wealth at the risk-free rate?
[B] Calculate the weights for investing in the risk-free asset and the S&P that produce a standard deviation for the entire portfolio that is twice the standard deviation of the S&P? Determine the expected return value on that portfolio?
[C] Calculate the expected return and standard deviation of a portfolio that is totally invested in the risk-free asset?
[D] Calculate the expected return and standard deviation of a portfolio that has 50% of its wealth in the risk-free asset and 50 percent in the S&P?