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In Simpleland there are only two risky stocks, A and B, with details listed below Number of Price per Expected outstanding Standard deviation of return
In Simpleland there are only two risky stocks, A and B, with details listed below Number of Price per Expected outstanding Standard deviation of return share rate of return Shares Stock A 800 $0.50 10% 14% Stock B 500 $1.20 15% 20% Furthermore, the correlation coefficient between the returns of stocks A and B isPAB = 1/6. There is also a risk-free asset, and Simpleland satisfies the CAPM exactly (Keep 4 decimal places to your answers, e.g. xxx.1234.) (a) What is the expected rate of return of the market portfolio? (b) What is the standard deviation of the return of the market portfolio? (c) What are the values of BA and ? BA (d) What is the risk-free rate in Simpleland
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