Assume the CAPM holds. The expected return of the market portfolio is 15% and its standard deviation is 20%. The T-bill rate is 5%.

(a) What is the standard deviation of an efficient portfolio that has an expected return of 10%?

(b) What is the expected return of a security that has a beta of 0.6? 7

(c) What is the covariance between the return of a security and the return of the market if the beta of the security is 0.8?

(d) (10 points) What is the correlation between the return of a security and the return of the market if the standard deviation of the security is 0.4 and its expected return is 0.25?