Exercise 8 Two stocks D and T have the following data: Correlation Rate of Standard Stock with Market return deviation portfolio D 11.74% 0.22 0.45 T 15.6% 0.28 0.33 If the Capital Asset Pricing Model holds for these two stocks then 1) Build a risk-free protfolio (10 pts) Answer: W of D= W of T = 2) What is the risk-free rate (5 pts) Answer= 3) Build a portfolio that has a beta = 1 (10 pts) Answer: W of D- W of T = 4) What is the return on the market portfolio (5 pts) Answers Exercise 8 Two stocks D and T have the following data: Correlation Rate of Standard Stock with Market return deviation portfolio D 11.74% 0.22 0.45 T 15.6% 0.28 0.33 If the Capital Asset Pricing Model holds for these two stocks then 1) Build a risk-free protfolio (10 pts) Answer: W of D= W of T = 2) What is the risk-free rate (5 pts) Answer= 3) Build a portfolio that has a beta = 1 (10 pts) Answer: W of D- W of T = 4) What is the return on the market portfolio (5 pts) Answers