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3 . 8 CAPM: The Capital Asset Pricing Model ( CAPM ) is a financial model that assumes returns on a portfolio are normally distributed.
CAPM: The Capital Asset Pricing Model CAPM is a financial model that assumes returns on a portfolio
are normally distributed. Suppose a portfolio has an average annual return of ie an average gain of
with a standard deviation of A return of means the value of the portfolio doesn't change,
a negative return means that the portfolio loses money, and a positive return means that the portfolio
gains money. Keep one decimal place.
a What percent of years does this portfolio lose money, ie have a return less than
b What is the cuto for the highest of annual returns with this portfolio?
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