Beta and CAPM A portfolio that combines the risk-free asset and the market portfolio has an expected return of 12 percent and a standard deviation of 18 percent. The risk-free rate is 5 percent, and the expected return on the market portfolio is 14 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 40 percent?

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