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2. Answer all parts of this question. (a) Assume that CAPM is true. The risk-free rate is RF, the expected return on the market

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2. Answer all parts of this question. (a) Assume that CAPM is true. The risk-free rate is RF, the expected return on the market M portfolio is ER, and the standard deviation of the return on the market portfolio is Consider a portfolio P with expected return of ER, and assume that it is on the efficient frontier. Use values for R = 7%, ER =14%, = 22% and ERP = 16%. F M (i) What is the beta of portfolio P? (ii) What is the standard deviation of the return on portfolio P? (iii) What is the covariance and correlation between the return on portfolio P with the return on the market portfolio?

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