An efficient portfolio has a 18% expected return.If the expected market return is 11% (with a standard deviation of 18%),and the risk-free rate is 5.5 %,what is the standard deviation of the portfolio?
A) 9.33%
B) 11.12%
C) 19.37%
D) 40.91%

Question

Quizplus · Accepted Answer

Weight in market portfolio,W = (0.18 - 0.055)/(0.11 - 0.055)= 2.2727
Weight in risk-free asset = 1 - 2.2727 = -1.2727
Portfolio standard deviation = 0.18 X 2.2727 = 0.4091 F1S1S1W1F1F1F10 40.91%

An Efficient Portfolio Has a 18% Expected Return