Question

a) Suppose the risk-free rate is 4.4% and the market portfolio
has an expected return of 10.9%. The

market portfolio has variance of 0.0391. Portfolio Z has a
correlation coefficient with the market of 0.31

and a variance of 0.3407. According to the capital asset pricing
model, what is the beta of Portfolio Z?

What is the expected return on Portfolio Z?

b) Suppose Portfolio X has beta of 1 with expected return of 11.5%.
Draw the SML and comment on

whether it is correctly priced. If not, how will the future price
change according to the CAPM?

Answer #1

Kindly do let me know in case you have any queries.

Suppose the risk-free
rate is 4.8 percent and the market portfolio has an expected return
of 11.5 percent. The market portfolio has a variance of .0442.
Portfolio Z has a correlation coefficient with the market
of .34 and a variance of .3345
According to the
capital asset pricing model, what is the expected return on
Portfolio Z? (Do not round intermediate calculations and
enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)

5)
A portfolio that combines the risk free asset and the market
portfolio has an expected return of 7% and a standard deviation of
10%. The risk free rate is 4%, and the market returns (expected) is
12%. What expected return would a security earn if it had a
correlation of 0.45 ewth the market portfolio and a standard
deviation of 55%.?
Suppose the risk free rate is 4.8% and the market portfolio has
an expected return of 11.4%. the...

A portfolio invests in a risk-free asset and the market
portfolio has an expected return of 7% and a standard deviation of
10%. Suppose risk-free rate is 5%, and the standard deviation on
the market portfolio is 22%. For simplicity, assume that
correlation between risk-free asset and the market portfolio is
zero and the risk-free asset has a zero standard deviation.
According to the CAPM, which of the following statement is/are
correct?
a. This portfolio has invested roughly 54.55% in...

A portfolio that combines the risk-free asset and the market
portfolio has an expected return of 7.4 percent and a standard
deviation of 10.4 percent. The risk-free rate is 4.4 percent, and
the expected return on the market portfolio is 12.4 percent. Assume
the capital asset pricing model holds.
What expected rate of return would a security earn if it had a .49
correlation with the market portfolio and a standard deviation of
55.4 percent? Enter your answer as a percent...

Assume the CAPM holds. The risk-free rate is 5% and the market
portfolio expected return is 15% with a standard deviation of 20%.
An asset has an expected return of 16% and a beta of 0.8.
a) Is this asset return consistent with the CAPM? If not, what
expected return is consistent with the CAPM?
b) How could an arbitrage profit be made if this asset is
observed?
c) Would such a situation be expected to exist in the longer...

The expected market return is 9%. The risk-free rate, 1.5%. Your
risky asset XYZ has a beta of 0.85 and an expected return of
10.50%. According to the CAPM model,
Select one:
a. Your asset XYZ is perfectly priced in the market.
b. Your asset XYZ is underpriced in the market.
c. No answer
d. Your asset XYZ is overpriced in the market.
e. There is not enough data to answer.

() The risk-free rate and the expected market rate of return
are 0.056 and 0.125, respectively. According to the capital asset
pricing model (CAPM), what is the expected rate of return on a
security with a beta of 1.25?
(s) Consider the CAPM. The risk-free rate is 5%, and the
expected return on the market is 15%. What is the beta on a stock
with an expected return of 17%?
(A coupon bond pays annual interest, has a par value...

Suppose that the market portfolio has an expected return of 10%,
and a standard deviation of returns of 20%. The risk-free rate is
5%.
b) Suppose that stock A has a beta of 0.5 and an expected return
of 3%. We would like to evaluate, according to the CAPM, whether
this stock is overpriced or underpriced. First, construct a
tracking portfolio, made using weight K on the market portfolio and
1 − K on the risk-free rate, which has the...

Suppose the risk-free return is 3.7% and the market portfolio
has an expected return of 11.2% and a standard deviation of 16%.
Johnson & Johnson Corporation stock has a beta of 0.28. What
is its expected return?

If the expected rate of return on the market portfolio is 14%
and the risk free rate is 6% find the beta for a portfolio that has
expected rate of return of 10%. What assumptions concerning this
portfolio and or market condition do you need to make to calculate
the portfolio’s beta? b. what percentage of this portfolio must an
individual put into the market portfolio in order to achieve an
expected return of 10%?

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