Question
1.CAPM The risk-free rate is 3%. Refer to the following: Portfolio (R): Expected Return: 11% / Standard Deviation: 10% / Beta: 0.5 Portfolio (Wilshire 5000):
1.CAPM
The risk-free rate is 3%. Refer to the following:
Portfolio (R):
Expected Return: 11% / Standard Deviation: 10% / Beta: 0.5
Portfolio (Wilshire 5000):
Expected Return: 14% / Standard Deviation: 12% / Beta: 1.0
A.When plotting portfolio R on the preceding table relative to the Security Market Line (SML), will portfolio R lie below/above/on the SML? Show by using the CAPM.
B.When plotting portfolio R on the preceding table relative to the Capital Market Line (CML), will portfolio R lie below/above/on the CML? Show by calculating the Sharpe Ratio.
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