The Expected Return for the Market Is 12 Percent, with a Standard

question 30

Essay

The expected return for the market is 12 percent, with a standard deviation of 20 percent. The expected risk-free rate is 8 percent. Information is available for three mutual funds, all assumed to be efficient, as follows:
$\begin{array}{ll}\underline { Mutual~~~Funds }&\underline { \sigma(\%) }\\\text { Affiliated } & 15 \\\text { Omega } & 17 \\\text { Ivy } & 19\end{array}$ (a) Based on the CML, calculate the market price of risk.
(b) Calculate the expected return on each of these portfolios.

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Definitions:

Adaptive Behavior

The ability to adjust to new conditions or environments in a way that is beneficial for survival and success.

Organism's Survival

The ability of a living entity to continue existing despite facing potentially life-threatening conditions or challenges.

Social Cognitive Theory

A theory by Albert Bandura that emphasizes the importance of observing, modeling, and imitating the behaviors, attitudes, and emotional reactions of others.

Albert Bandura

A renowned psychologist best known for his social learning theory, emphasizing the role of observational learning, imitation, and modeling in behavior.