Question

a. Fill in the missing values in the table. (Leave no cells blank - be certain to enter 0 wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Security	Expected Return	Standard Deviation	Correlation*	Beta
Firm A	.102	.39		.77
Firm B	.148		.58	1.32
Firm C	.168	.57	.43
The market portfolio	.12	.20
The risk-free asset	.05

Answer 1

Beta = Correlation(Standev of Firm/Standev of Market portfolio),

For Firm A,

Correlation = 0.77*0.20/0.39

Correlation = 0.39

For Firm B,

Standev of Firm B = 1.32*0.20/0.58

Standev of Firm B = 0.46

For Firm C,

Beta = 0.43*0.57/0.20

Beta = 1.23

For Market Portfolio,

Correlation = 1 (as it is market portfolio)

Beta = 1 (as it is market portfolio)

For risk free asset,

Standev = 0 (as it is risk free asset)

Correlation = 0 (as it is risk free asset)

Beta = 0 (as it is risk free asset)