Question
Stocks A and B have the excess returns as described below: RA = 1.5RM + eA RB = 2.0RM + eB The covariance between these
Stocks A and B have the excess returns as described below:
RA = 1.5RM + eA
RB = 2.0RM + eB
The covariance between these two stock returns is 0.09. In addition, the highest Sharpe ratio available in the market is 0.38. According to the CAPM, what is the expected excess return on A, E(RA)? [10 points]
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Investment Analysis And Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
7th Edition
0324171730, 978-0324171730
