Assume CAPM is the correct equilibrium asset pricing model (a) Fill in all missing values in the table below Security Expected Return Beta Standard Deviation Idiosyncratic Risk Risk free asset 5 Market portfolio 15 15 Stock A 2 10 Stock B 50 15 Stock C 0 5 10 (b) An investor decides to invest equally into stock A, B and C What is the total risk of his portfolio What is the market risk What is the non market risk Assume that the idiosyncratic risks are uncorrelated

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Assume CAPM is the correct equilibrium asset pricing model. (a) Fill in all missing values in the table below Security Expected Return Beta Standard Deviation

Assume CAPM is the correct equilibrium asset pricing model.

(a) Fill in all missing values in the table below

Security	Expected Return	Beta	Standard Deviation	Idiosyncratic Risk
Risk-free asset	5%
Market portfolio	15%		15%
Stock A		2		10%
Stock B			50%	15%
Stock C		0.5	10%

(b) An investor decides to invest equally into stock A, B and C. What is the total risk of his portfolio? What is the market risk? What is the non-market risk? Assume that the idiosyncratic risks are uncorrelated.

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