Question
11. If the expected return on the market portfolio is estimated to be 15 %, the risk-free rate of interest is 7 %, and the
11. If the expected return on the market portfolio is estimated to be 15%, the risk-free rate of interest is 7%, and the beta of asset i is 0.40, what is the expected return on asset i using CAPM model? % Place your answer as a PERCENT using two decimal places and no percentage sign. For example, if your answer is seven point five two percent, type 7.52.
12. Financial analysts have estimated the returns on shares of the Woods Corporation and the overall market portfolio under two economic states nature as follows. For Woods the state dependent returns are -0.03 in recession, and 0.04 in an economic boom. For the market the state dependent returns are -0.06 in recession, and 0.08 in boom. The analyst estimates that the probability of a recession is 0.50 while the probability of an economic boom is 0.50. Compute the standard deviation of the market. * State your answer in decimal form, working your analysis using at least four decimal places of accuracy.
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