Question
question 1 A portfolio manager has identified 20 stocks with a high ESG rating and 20 stocks with a low ESG rating. The portfolio of
question 1
A portfolio manager has identified 20 stocks with a high ESG rating and 20 stocks with a low
ESG rating. The portfolio of stocks with high ESG scores has beta of 0.8 and an expected
return of 5%, while the portfolio of stocks with low ESG scores has a beta of 1.2 and an
expected return of 7%. Further, assume that the CAPM assumptions hold.
1. What is the riskfree rate and the market risk premium?
2. How can the portfolio manager replicate the outcome of the portfolio of stocks with
low ESG scores without investing in companies with low ESG scores?
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Islamic FinanceA Practical Perspective
Authors: Nafis Alam, Lokesh Gupta, Bala Shanmugam
1st Edition
3319665588, 9783319665580
