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kaheart [24]
2 years ago
14

You invest $1,000 in a complete portfolio. The complete portfolio is composed of a risky asset with an expected rate of return o

f 16% and a standard deviation of 20% and a Treasury bill with a rate of return of 6%. The slope of the capital allocation line formed with the risky asset and the risk-free asset is approximately ________.
Business
1 answer:
vladimir1956 [14]2 years ago
3 0

Answer:

50%, or 0.5

Explanation:

The slope of the capital allocation line (CAL) can be calculated using the following formula:

Slope of CAL = (Return of risky asset - Return of Risk-less asset) ÷ Standard deviation of the risky asset

Therefore, we have:

Slop of CAL = (16% - 6%) ÷ 20% = 50%, or 0.5

Therefore, slope of the capital allocation line formed with the risky asset and the risk-free asset is approximately 50%, or 0.5.

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