Question
The expected return of the market is E(rM) = 14%, while the risk-free rate is rf = 6%. Stock E(r) A 1 15% B 0.7
The expected return of the market is E(rM) = 14%, while the risk-free rate is rf = 6%. Stock E(r) A 1 15% B 0.7 12% C 0.5 10% D 1.2 15% E 1.4 17% F 1.5 18%
1. Which assets are correctly priced according to the CAPM? Which ones are under-priced? Which ones are over-priced?
2. Using all under-priced securities, what is the alpha of an equally-weighted portfolio? Is it under-priced?
3. Using all over-priced securities, what is the alpha of an equally-weighted portfolio? Is it over-priced?
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Financial Management For Nurse Managers And Executives
Authors: Cheryl Jones, Steven A. Finkler, Christine T. Kovner, Jason Mose
5th Edition
0323415164, 9780323415163
