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You have been provided the following data on the securities of three firms and the market: Security E[Ri] i iM i A 0.13 0.12 .75
You have been provided the following data on the securities of three firms and the market:
Security | E[Ri] | i | iM | i |
A | 0.13 | 0.12 | .75 | 0.90 |
B | 0.16 | .275 | 0.40 | 1.10 |
C | 0.25 | 0.24 | 0.75 | 1.8 |
Market | 0.15 | 0.10 | 1 | 1 |
Risk-free asset | 0.05 | 0 | 0 | 0 |
Suppose that you are currently holding a portfolio consisting of Firm B only. If you increase your portfolio weight on Firm B by 0.2 (or 20%) and borrow the needed money at the risk-free rate, what will be the new standard deviation of your portfolio?
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