. Suppose there are two independent economic factors, M, and M,. The risk-free rate is 7%, and all stocks have independent firm-specific components with a standard deviation of 50%. Portfolios A and B are both well diversified. Portfolio Beta on M, Beta on M, Expected Return (%) А 1.8 2.1 40 В 2.0 -0.5 10 What is the expected return-beta relationship in this economy? (O LO 7-5)
. Suppose there are two independent economic factors, M, and M,. The risk-free rate is 7%, and all stocks have independent firm-specific components with a standard deviation of 50%. Portfolios A and B are both well diversified. Portfolio Beta on M, Beta on M, Expected Return (%) А 1.8 2.1 40 В 2.0 -0.5 10 What is the expected return-beta relationship in this economy? (O LO 7-5)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Transcribed Image Text:33. Suppose there are two independent economic factors, M, and M,. The risk-free rate is 7%, and all stocks have
independent firm-specific components with a standard deviation of 50%. Portfolios A and B are both well diversified.
Portfolio
Beta on M,
Beta on M,
Expected Return (%)
A
1.8
2.1
40
В
2.0
-0.5
10
What is the expected return-beta relationship in this economy? (L LO 7-5)
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