1. (A simple portfolio) Someone who believes that the collection of all stocks satisfies a single-factor model...
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1. (A simple portfolio) Someone who believes that the collection of all stocks satisfies a single-factor model with the market portfolio serving as the factor gives you information on three stocks which make up a portfolio (See Table 86) In addition, you know that the market portfolio has an expected rate of return of 12% and a standard deviation of 18% The risk-free rate is 5%
(a) What is the portfolio's expected rate of return?
(b) Assuming the factor model is accurate, what is the standard deviation of this rate of return?
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