When risk-free borrowing is restricted but all other CAPM assumptions hold, then the simple version of the
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When risk-free borrowing is restricted but all other CAPM assumptions hold, then the simple version of the security market line is replaced by its zero-beta version. Accordingly, the risk-free rate in the expected return–beta relationship is replaced by the zero-beta portfolio’s expected rate of return: p-856 E(ri
) = E(rZ) + βi
[E(rM) − E(rZ)]
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ISE Investments
ISBN: 9781266085963
13th International Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus
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