Question
Use the following data to evaluate the performance of Fund K. Fund K: beta 1.58, expected return: 32%, standard deviation: 40% Market portfolio: expected return
Use the following data to evaluate the performance of Fund K.
Fund K: beta 1.58, expected return: 32%, standard deviation: 40%
Market portfolio: expected return 18%, standard deviation 25%
The risk-free rate: is 6%
Does Fund K have an abnormal return according to the Capital Asset Pricing Model (CAPM)? Why or why not? Explain.
Step by Step Solution
3.29 Rating (161 Votes )
There are 3 Steps involved in it
Step: 1
Using CAPM expected rate can be calculated as RfBetaRmRf where Rf is risk free rate Rm is ma...
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Macroeconomics Principles And Policy
Authors: William J. Baumol, Alan S. Blinder
11th Edition
0324586213, 978-0324586213
