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Calculate the Sharpe ratios for the market portfolio and portfolio A. a.) Portfolio Expected Return Standard Deviation Risk-free 7 % 0 % Market 12.2 31
Calculate the Sharpe ratios for the market portfolio and portfolio A.
a.) Portfolio Expected Return Standard Deviation
Risk-free 7 % 0 %
Market 12.2 31
A 11.0 20
________________________________________ Use the equation for the Sharpe Ratio:
b.) If the simple CAPM is valid, is the above situation possible? Hint: (remember what CAPM is predicting about the market portfolio)
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