Sigma(m) 20%

Sigma(P) 10%
R(m) 15%
R(f) 8%

R(P) 11.5% R(P) = R(f) + ((Sigma(P) / Sigma(m))*(R(m) - R(f)))

How to construct this portfolio with return Two-Funds Separation Theory: If there are only two funds available,
= 11.5% and risk = 10%? being risk-free and second being market portfolio, people can comb
them in any combination according to their risk appetite.

W1 50.0% W1*R(m) + W2*R(f) = R(P)

W2 50.0% W2 = 1 - W1

R(P) 11.5%
Var(P) 1%
Sigma(P) 10%
re only two funds available, one
portfolio, people can combine
ng to their risk appetite.