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10 & 11.

16. E(rC) = rf + y[E(rP) – rf]

σC = yσP

σC = yσP y = σC/σP

E(rC) = rf + y[E(rP) – rf]

= rf + σC/σP [E(rP) – rf]

= rf + σC [E(rP) – rf]/σP

The return of the combined portfolio (E(rC)) is a linear function of the risk of the combined portfolio (σC).
The intercept (rf = 0.08) and the slope ([E(rP) – rf]/σP = 0.3571) are constants.

σC E(rC)
0.00% 8.00%
19.60% 15.00%
28.00% 18.00%