Question
The risk-free rate is 2%, the expected return of the market portfolio is 8%, and the standard deviation of the return of the market portfolio
The risk-free rate is 2%, the expected return of the market portfolio is 8%, and the standard deviation of the return of the market portfolio is 15%. Consider a portfolio of Biotech stocks with an expected return of 11% and a standard deviation of 45%. Suppose the CAPM holds.
A) What is the beta of this portfolio?
B) How does it relate to market returns? (Note: Your answer must be a number between -1 and 1.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
A The CAPM equation is Expected Return RiskFree Rate Beta x Expected Market Return RiskFree R...
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Step: 2
Step: 3
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
