Problem Set 7 solutions are available at…

While I have your attention, I’d like to address some notational errors I made in the version of these solutions that I showed during class today. I would like to call your attention to the change in the notation for the capital market lines based on the Cat Bond/Equity Fund portfolio and the Government Bonds/Equity Fund portfolio.  These portfolios are now appropriately referenced by the acronyms CBEF (for the Cat Bond/Equity Fund portfolio) and GBEF (for the Government Bonds/Equity Fund portfolio). In the context of problem 1C, the capital market line equations for these two portfolios are now expressed as follows:

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