CAS Exam 9 Spring 2014, Question 1
Study guide: Exam 9
Given the following about a risky portfolio, P:
- Expected return of P is 16%.
- Standard deviation of expected return of P is 24%.
- Borrowing rate is 10%.
- Lending rate is 6%.
Graph the capital allocation line (CAL). Plot the position of P on the CAL graph. Clearly label the axes, the y-intercept of the CAL, and the borrowing and lending ranges.
Part a (1.25 points)
No current syllabus covers this question; it is kept for the record.
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