Question
2. Assume that as of December 2020, market premium is 9%, market volatility is 30%, and the risk-free rate is 3%. a. Write the equation
2. Assume that as of December 2020, market premium is 9%, market volatility is 30%, and the risk-free rate is 3%.
a. Write the equation of the security market line. Illustrate it in a graph.
b. Is there market premium or market discount?
c. Suppose AAPL has a beta of 60%. Using the CAPM, determine the expected return.
d. Suppose AAPL has a volatility of 60% and a correlation with the market portfolio of 25%. Using the
CAPM, determine expected return.
e. Suppose AAPL has a volatility of 80% and a correlation with the market portfolio of -25%. Using the
CAPM, determine expected return.
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Cornerstones Of Financial Accounting
Authors: Jay Rich, Jeff Jones
3rd Edition
1285424409, 978-1285423678
