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Investment Management Inc IMI uses the capital market line to make asset allocation recommendations IMI derives the following forecasts Expected return on the market portfolio

Investment Management Inc. (IMI) uses the capital market line to make asset allocation recommendations. IMI derives the following forecasts:

• Expected return on the market portfolio: 12%.

• Standard deviation on the market portfolio: 20%.

• Risk-free rate: 5%.

Samuel Johnson seeks IMI’s advice for a portfolio asset allocation. Johnson informs IMI that he wants the standard deviation of the portfolio to equal half of the standard deviation for the market portfolio.

Using the capital market line, what expected return can IMI provide subject to Johnson’s risk constraint? (Do not round intermediate calculations. Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Expected return of the portfolio _______%??

 

Apr 03 2020 View more View Less

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