EVERYTHING IS ONE QUESTION

Suppose you group all the stocks in the world into mutually exclusive portfolios (each stock is in only one portfolio): growth stocks and value stocks. Suppose the two portfolios have equal size (in terms of total value), a correlation of 0.5, and the following characteristics: The risk free-rate is 4%. a. What is the expected return and volatility of the market portfolio (which is a 50-50 combination of the two portfolios)? b. Calculate the Sharpe ratios of the value stock, growth stock, and market portfolio. c. Does the CAPM hold in this economy? (Hint. Is the market portfolio efficient?) he two portfolios)? Data table (Click on the icon located on the top-right comer of the data table below in order to copy its contents into a spreadsheet) Expected Return Volatility Value Stocks 11% 10% Growth Stocks 18% 27% Print Done