Given an optimal risky portfolio with an expected return of 15% and standard. deviation of 30% and a risk free-rate of 1.5%, what is the slope of the best feasible CAL? a) 0.39 b) 0.13 c) 0.45 d) 0.42 e) 0.36
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Step 1: The slope of the Capital Allocation Line (CAL) is given by the Sharpe Ratio, which is calculated as: $$Sharpe Ratio = \frac{E(R_p) - R_f}{\sigma_p}$$ where: $E(R_p)$ is the expected return of the portfolio $R_f$ is the risk-free rate $\sigma_p$ is the Show more…
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