6-17

Calculate the monthly holding-returns for Citigroup and the S and P 500 index. What are the average monthly returns and standard deviation for each? Graph the Citigroup returns and standard deviations for each? Use a spreadsheet to compute the slope of the characteristic line. Interpret your findings. (security market line) Determine the expected return and beta for the following portfolio: given the foregoing information, draw the security market line and show where the securities and portfolio fit on the graph. Assume that the risk-free rate is 2 percent and that the expected on the market portfolio is 8 percent. How would you interpret these findings