Question
Suppose there are two independent economic factors, M 1 and M 2 . The risk-free rate is 4%, and all stocks have independent firm-specific components
Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firm-specific components with a standard deviation of 57%. Portfolios A and B are both well diversified.
| Portfolio | Beta on M1 | Beta on M2 | Expected Return (%) |
| A | 1.7 | 2.3 | 36 |
| B | 2.2 | -0.8 | 9 |
What is the expected returnbeta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
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The Handbook Of Professionally Managed Assets A Definitive Guide To Profiting From Alternative Investments
Authors: Keith Fevurly
1st Edition
143026019X, 978-1430260196
