The expected return of the market portfolio is 14 percent with a standard deviation of 25 percent.The risk-free rate is 6 percent.What would be the weight of the market portfolio in an efficient portfolio with a standard deviation of 30 percent,if borrowing is not allowed?
A) 16.78%
B) 83.33%
C) 20%
D) Cannot be constructed

Question

Quizplus · Accepted Answer

The weight of the market portfolio should be .30/.25=1.20 and the weight of risk-free asset is 1-1.20=-0.20.Since borrowing is not allowed,Such a market portfolio cannot be constructed.

The Expected Return of the Market Portfolio Is 14 Percent