The volatility of a security Z is 19% whereas the volatility of the market portfolio is 8%. The coefficient of correlation between them is 0.4.
The volatility of a security Z is 19% whereas the volatility of the market portfolio is 8%. The coefficient of correlation between them is 0.4. The risk free rate of return is 8% and the expected return on the market portfolio is 18%. Calculate the beta of the security and total risk premium of acquiring the security.
| A. Beta: 0.95, total risk premium: 9.5% | |
| B. Beta: 1.1, total risk premium: 11% | |
| C. Beta: 1.1, total risk premium: 10% | |
| D. Beta: 0.95, total risk premium: 10% |
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Authors: Janet Smith, Richard Smith, Richard Bliss
1st Edition
0804770913, 9780804770910
