Question
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6.9 percent and a standard deviation of 9.9 percent.
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6.9 percent and a standard deviation of 9.9 percent. The risk-free rate is 3.9 percent, and the expected return on the market portfolio is 11.9 percent. Assume the capital asset pricing model holds.
What expected rate of return would a security earn if it had a .44 correlation with the market portfolio and a standard deviation of 54.9 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Please show me how to do it step by step.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started