Question
The market has two traded risky assets, A and B. We know that E(rA) = 0.4, E(rB) = 0.6, A = 2, B = 3,
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The market has two traded risky assets, A and B. We know that E(rA) = 0.4, E(rB) = 0.6, A = 2, B = 3, and AB = 0. Suppose the market portfolio is M = 0.3A+0.7B. The risk free asset has a rate of return rf = 0.1.
(a) What is the risk premium of the market portfolio? (b) Could you calculate the price of risk of holding the market portfolio?
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Financial Modeling
Authors: Simon Benninga, Tal Mofkadi
5th Edition
0262046423, 9780253337825
