Question
You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset. Security Expected Return Std. Deviation
You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset.
| Security | Expected Return | Std. Deviation | Correlation with the Market | Beta |
| Firm A | .10 | .31 |
| .85 |
| Firm B | .14 |
| .50 | 1.40 |
| Firm C | .16 | .65 | .35 |
|
| The Market Portfolio | .12 | .20 | ||
| The Risk- Free Asset | .05 |
a. Using the Capital Asset Pricing Model (CAPM), fill in the missing values.
b. Draw the Security Market line (SML) and plot all the securities listed above.
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Lectures On Public Economics
Authors: Anthony B. Atkinson, Joseph E. Stiglitz
1st Edition
0691166412, 978-0691166414
