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Questions 28-31 use the following information: Assume there are 2 portfolios. Portfolio A holds just McDonalds and has a beta of 1.1. Portfolio B holds
Questions 28-31 use the following information: Assume there are 2 portfolios. Portfolio A holds just McDonalds and has a beta of 1.1. Portfolio B holds 100 stocks and has a beta of 1.1.
- Which portfolio has a greater standard deviation? Why? Explain
- Which portfolio has the higher expected return according to CAPM? Explain.
- Draw the scatterplots of the two portfolios relative to the Standard and Poors 500.
- Why do we get the same expected return for Portfolio A and B (according to CAPM) even though Portfolio A has more standard deviation?
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Multinational Financial Management
Authors: Alan C. Shapiro
7th Edition
0471395307, 9780471395300
