Question
Suppose there are two independent economic factors, M 1 and M 2 . The risk-free rate is 6%, and all stocks have independent firm-specific components
| Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 6%, and all stocks have independent firm-specific components with a standard deviation of 42%. Portfolios A and Bare both well diversified. |
| Portfolio | Beta on M1 | Beta on M2 | Expected Return (%) |
| A | 1.5 | 2.4 | 32 |
| B | 2.3 |
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School Finance Elections
Authors: Don E. Lifto, Bradford J. Senden, Daniel A. Domenech
2nd Edition
1607091488, 978-1607091486
