2. Consider a market with an expected return of 20%, a risk (o) of 25% and a risk-free rate of 7%. a. Portfolio A is on the efficient frontier and has an expected return of 30%. Compute the risk (o) of this portfolio and the coefficient of correlation with the market. eynor's and Jensen's performance measures for the portfolio. the stocks are over or D. Portfolio B has an expected return of 35% and a risk (o) of 65%. What is the specific risk of this ortfolio?
2. Consider a market with an expected return of 20%, a risk (o) of 25% and a risk-free rate of 7%. a. Portfolio A is on the efficient frontier and has an expected return of 30%. Compute the risk (o) of this portfolio and the coefficient of correlation with the market. eynor's and Jensen's performance measures for the portfolio. the stocks are over or D. Portfolio B has an expected return of 35% and a risk (o) of 65%. What is the specific risk of this ortfolio?
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
Section: Chapter Questions
Problem 1PS
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Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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Transcribed Image Text:whether the stocks are over or
Treynor's and Jensen's performance measures for the portfolio.
2. Consider a market with an expected return of 20%, a risk (o) of 25% and a risk-free rate of 7%.
a. Portfolio A is on the efficient frontier and has an expected return of 30%. Compute the risk (o) of
this portfolio and the coefficient of correlation with the market.
b. Portfolio B has an expected return of 35% and a risk (o) of 65%. What is the specific risk of this
portfolio?
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