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can some body help me to solve this question 8-24 :( What is the beta on each portfolio? Which portfolio is riskier? If the risk-free
can some body help me to solve this question 8-24 :(
What is the beta on each portfolio? Which portfolio is riskier? If the risk-free rate of interest were 4% and the market risk premium were 5%, what rate of return would you expect to earn from each of the portfolios? If the risk-tree rate the return is 4% and the expected rate of return on the market portfolio is l0%. Graph the Security Market Line (SML). Also, calculate and label the market risk premium on the graph. Using your graph from question a, identify the expected rates of return on a portfolio with beta of .4 and a beta of 1.8, respectively. Now assume that because of a financial crisis the economy slows down anticipated inflation drops As a result, the risk-free rate of return drops to 2% and the expected rate of return on the market portfolio drops to 8%. Draw the resulting security market line. Now assume that because of economic fears, investors have become more risk averse, demanding a higher return on all assets that have any risk. This results in an increase in the expected rate of return on the market portfolio to 12% (with the free rate equal to 4%). Draw the resulting SML. What can you conclude about the effect of financial crisis on expected rates of returnStep by Step Solution
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