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:

Coracobrachialis

A muscle in the shoulder that assists with flexion and adduction of the arm at the shoulder joint.

Teres Major

A muscle of the upper limb that assists in rotating the arm and bringing it towards the body.

Deltoid

A large triangular muscle covering the shoulder joint, responsible for lifting the arm and giving the shoulder its range of motion.

Teres Major

A muscle of the upper limb that helps in the rotation and adduction of the arm.