Question

The Capital Asset Pricing Model (CAPM) is a financial model that
assumes returns on a portfolio are normally distributed. Suppose a
portfolio has an average annual return of 10% (i.e. an average gain
of 10%) with a standard deviation of 31.5%. A return of 0% means
the value of the portfolio doesnt change, a negative return means
that the portfolio loses money, and a positive return means that
the portfolio gains money.

(a) What percent of years does this portfolio lose money, i.e. have
a return less than 0%?

(b) What percent of years does this portfolio return more than
8%?

(c) What percent of years does this portfolio return between 10%
and 35%?

(d) What is the cutoff for the highest 81% of annual returns with
this portfolio?

Answer #1

The Capital Asset Pricing Model (CAPM) is a financial model that
assumes returns on a portfolio are normally distributed. Suppose a
portfolio has an average annual return of 16% (i.e. an average gain
of 16%) with a standard deviation of 30.5%. A return of 0% means
the value of the portfolio doesnt change, a negative return means
that the portfolio loses money, and a positive return means that
the portfolio gains money.
(a) What percent of years does this portfolio...

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portfolio has an average annual return of 15.5% (i.e. an average
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means the value of the portfolio doesn't change, a negative return
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Capital Asset Pricing Model is a financial model that assumes
returns on a... Portfolio returns. The Capital Asset Pricing Model
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change, a negative return means that the portfolio loses money, and
a positive return means that the portfolio gains money.
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According to the capital asset pricing model (CAPM), where does
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