Despite their differences, with which proposition are two economists chosen at random most likely to agree? having a single inco
1 answer:
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Answer:
risk free rate of return is = 11.37 %
Explanation:
given data
K expected rate of return = 13%
K standard deviation = 19% = 0.19
L expected rate of return = 10%
L standard deviation = 16% = 0.16
to find out
risk-free portfolio rate of return
solution
first we find here weight of each portfolio
weight of K = ..................1
weight of K =
weight of K = 0.4571 = 45.71%
and
weight of L = 1 - 0.4571
weight of L = 0.5428 = 54.28 %
so that
risk free rate will be here
risk free rate = ( weight of K × K expected rate of return ) + ( weight of L + L expected rate of return ) ..........................2
risk free rate = ( 45.71 % × 13 % ) + ( 54.28 % + 10% )
risk free rate = 11.37 %