投资学 7 Capital Allocation Between the Risky Asset and the Risk-Free Asset教学幻灯片.pptVIP

Capital Allocation Between the Risky Asset and the Risk-Free Asset;LEARNING OBJECTIVES(continue);Introduction to Capital Allocation Between The Risky Asset and The Risk-Free Asset:;Introduction to Capital Allocation Between The Risky Asset and The Risk-Free Asset:;It’s possible to split investment funds between safe and risky assets. Risk free asset: proxy; T-bills Risky asset: stock (or a portfolio);Issues Examine risk/return tradeoff. Demonstrate how different degrees of risk aversion will affect allocations between risky and risk free assets.;rf = 7%;E(rc) = yE(rp) + (1 - y)rf;Possible Combinations;p;c;Borrow at the Risk-Free Rate and invest in stock. Using 50% Leverage, rc = (-.5) (.07) + (1.5) (.15) = .19 ?c = (1.5) (.22) = .33;CAL (Capital Allocation Line);CAL with Higher Borrowing Rate;Greater levels of risk aversion lead to larger proportions of the risk free rate. Lower levels of risk aversion lead to larger proportions of the portfolio of risky assets. Willingness to accept high levels of risk for high levels of returns would result in leveraged combinations.;Utility Function;CAL with Risk Preferences;The Capital Market Line(CML)