Question
Suppose the expected annual rate of return of the market portfolio is 15%, the standard deviation of the market portfolio is 30% and the risk-free
Suppose the expected annual rate of return of the market portfolio is 15%, the standard deviation of the market portfolio is 30% and the risk-free rate is 3% per year. A security has a standard deviation of 60% and a correlation with the market portfolio of 0.5.
According to the CAPM, what is its expected return?
Step by Step Solution
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Step: 1
The CAPM formula for expected return is ER Rf beta x ERm Rf where ER is the expected return on the s...
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Introduction To Business Statistics
Authors: Ronald M. Weiers
7th Edition
978-0538452175, 538452196, 053845217X, 2900538452198, 978-1111524081
