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You have been provided with the following market data. Assuming that the CAPM and the SML hold, fill in the missing values in the table:
You have been provided with the following market data. Assuming that the CAPM and the SML hold, fill in the missing values in the table:
Security | Expected Return | Std. Dev. | Correlation | Beta |
A | 20% | 25% |
|
|
B |
| 18% | .3 |
|
C | 18% |
| .75 |
|
D |
|
| .5 | 1 |
Market | 14% | 10% |
|
|
Risk-free Rate | 6% |
|
|
|
*Std. Dev.: Standard deviation of the security returns
*Correlation: Correlation of return between the security and the market portfolio
Question: What is the beta of a portfolio with $10,000 invested in A, 20,000 invested in B, $10,000 invested in C, and $20,000 invested in the risk-free rate?
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