Suppose that the risk-free rate, R F, is 5 percent; the expected return to the investor's tangency portfolio. E(R T), is 15 percent; and the standard deviation of the tangency portfolio is 25 percent.
i. How much return does this investor demand in order to take on an extra unit of risk?
ii. Suppose the investor wants a portfolio standard deviation of return 10 percent. What percentage of assets should be in the tangency portfolio, and what is the expected return.
iii. Suppose the investor wants to put 40 percent of the portfolio in the risk- free rate. what is the portfolio expected return? What is the standard deviation?
iv. What expected return should the investor demand for a portfolio with a standard deviation of 35 percent?
v. What combination of the tangency portfolio and the risk- free asset does the investor need to hold in order to have a portfolio with an expected return of 19 percent.
vi. If the investors has $10 million to invest, how much must he borrow at the risk- free rate to have a portfolio with an excpeted return of 19%