How much must you invest in the market portfolio

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Reference no: EM131497702

Luxury Products Inc. (LPI) stock has a beta of 1.2 and a standard deviation of 43%. Assuming a risk-free rate of 4% and an expected return on the market portfolio of 9%, what is the expected return of LPI? Suppose that a standard deviation of the market portfolio is 30%. It is possible to find a portfolio on the capital market line that has the same expected return as LPI. To construct that portfolio, how much must you invest in the risk-free asset and how much must you invest in the market portfolio? What is the standard deviation of the CML portfolio with an expected return identical to that of LPI? Compare the standard deviations of the CML portfolio and LPI. Why does LPI have a highter stardard deviation. SHOW DETAILED WORK.

Reference no: EM131497702

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