…http://fin4335.garven.com/fall2023/ps7solutions.pdf.
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:
