Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jan 27, 2023

Assume the CAPM holds. You are holding a portfolio with the beta of 0.9 and the standard deviation of 40%. The expected return on the

Assume the CAPM holds. You are holding a portfolio with the beta of 0.9 and the standard deviation of 40%.

The expected return on the market portfolio is 10% and the standard deviation of returns on the market portfolio is 16%.

The risk-free rate is 3.5%. How much more expected return without increase in the risk of your portfolio can you earn if you make your portfolio efficient?

Step by Step Solution

★★★★★

3.44 Rating (160 Votes )

There are 3 Steps involved in it

Step: 1

The expected return on the portfolio Erp can be calculated using the Capital Asset Pricing Model CAP... blur-text-image

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

Recommended Textbook for

Essentials Of Corporate Finance

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

7th Edition

0073382469, 978-0073382463

More Books

Students also viewed these Finance questions

Question

★★★★★

You have a portfolio with a beta of 1.35. What will be the new portfolio beta if you keep 85 percent of your money in the old portfolio and 5 percent in a stock with a beta of 0.78

Answered: 1 week ago

Question

★★★★★

You have a portfolio with a beta of 1.1. What will be the new portfolio beta if you keep 85 percent of your money in the old portfolio and 15 percent in a stock with a beta of 0.5?

Answered: 1 week ago

Question

★★★★★

The expected return on the market portfolio is 15 percent, and the return on the risk-free security is 5 percent. What is the expected return on a portfolio with a beta equal to 0.5?

Answered: 1 week ago

Question

★★★★★

Benny sells an apartment building. His adjusted basis for regular income tax purposes is $450,000, and it is $475,000 for AMT purposes. He receives $700,000 from the sale. a. Calculate Bennys gain...

Answered: 1 week ago

Question

★★★★★

Sonic Corporation began business in 1953. In 2010 it was operating 3,572 drive-in hamburger restaurants throughout the United States and Mexico. The following data were taken from the companys 2010...

Answered: 1 week ago

Question

★★★★★

A work center has two machines and two operators. The work center operates on two shifts and each operator works one shift at 8 hours per shift. The efficiency and utilization rates of the two...

Answered: 1 week ago

Question

★★★★★

Describe the Gestalt approach to the scientific method. Contrast this approach to the behavioristic approach.

Answered: 1 week ago

Question

★★★★★

If a mutual funds net asset value is $23.40 and the fund sells its shares for $25, what is the load fee as a percentage of the net asset value?

Answered: 1 week ago

Question

★★★★★

( 1 point ) The refinery will require a cooling system. There will be a cooling pond on property that you expect to stay at 3 5 C . The water used to cool the exhaust will be sent to the pond at a...

Answered: 1 week ago

Question

★★★★★

Ann Riat - Salary Comparison The director of the company has asked you to confirm with Ann if she prefers to keep her annual salary of $64,000 and agrees to receive no commission on future...

Answered: 1 week ago

Question

★★★★★

Chris, age 45, contributes to his employer's 401(k) retirement plan. As of 2018, what's the maximum annual limit on elective deferrals he can take? Question 16 options: 1) $50,000 2) $6,000 3)...

Answered: 1 week ago

Question

★★★★★

During last assignment, you did such an amazing job with Frank's finances, that he is retaining you as his financial consultant. Thanks to you, Frank's financial house is in excellent order. He is...

Answered: 1 week ago

Question

★★★★★

Determine the total mass of the horizontal beam when the mass of the beam is 37.5kg/m. Determine also the force resultant affecting the tilted rope when angle =30 5.6 m 2.4 m B Tilted rope- 250kg

Answered: 1 week ago

Question

★★★★★

After a breakthrough election victory at Amazon, the Amazon Labor Union fell far short of winning enough votes to unionize a second warehouse on Staten Island in New York. The vote was 618 votes...

Answered: 1 week ago

Question

★★★★★

How can you customize this report to find any open balances? Customize > Filter, then choose Uncleared in the Cleared dropdown Gear icon > Change columns, then mark the Credit checkbox in Change...

Answered: 1 week ago

Question

★★★★★

A codebook is used in quantitative research to define the variables (or columns) in a data set and the response categories for each of these variables. Looking at the codebook for this Assessment,...

Answered: 1 week ago

Question

★★★★★

Consider the following situations for Shocker: a. On November 28, 2018, Shocker receives a $2,400 payment from a customer for services to be rendered evenly over the next three months. Deferred...

Answered: 1 week ago

Question

★★★★★

What are the principal alloying elements in SAE 4340 steel?

Answered: 1 week ago

Question

★★★★★

Ricky Ripovs Pawn Shop charges an interest rate of 15 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. What rate should the shop report? What is...

Answered: 1 week ago

Question

★★★★★

You are scheduled to receive $13,000 in two years. When you receive it, you will invest it for six more years at 9 percent per year. How much will you have in eight years?

Answered: 1 week ago

Question

★★★★★

Suppose the spot exchange rate for the Hungarian forint is HUF 221. Interest rates in the United States are 3.2 percent per year. They are 5.1 percent in Hungary, (a) What do you predict the exchange...

Answered: 1 week ago

Question

★★★★★

3. How Is Research Knowl edge D isu;buted? Researchers Study? a. Acad e1nic Pu blishing b. Scholarly Research b. Social Di alogue and Pu blic Policy c. Applied Research c. Com muni cation in th e...

Answered: 1 week ago

Question

★★★★★

A mental health professional with a medical degree who can prescribe medication is a _______.

Answered: 1 week ago

Question

★★★★★

ii. Tenacity Study?

Answered: 1 week ago

Previous Question Next Question