3. Consider two efficient portfolios A and B and a market index M with a return of 13% and arisk (standard deviation) of 5%. An investor will place 40000$ of his investment budget inportfolio A and the difference in B. The risk premium expected by the investor is 11.2% andthe Sharpe ratio of his portfolio (combining A and B) is 2.a. What is the beta of the investor's portfolio?b. What amount has the investor placed in portfolio B? The risk (standard deviation) of A is4% and the covariance between A and B is 0.24%.c. What is the expected return at equilibrium for a stock with a beta of 1.5 trading on thismarket?d. If you had a budget of 500000$ how would you construct an efficient portfolio on thismarket?

"As you have asked questions with multiple subparts, According to honoring guidelines we will answer…

a. What is the beta of the investor's portf b. What amount has the investor placed in portfolio B? The risk (standard deviation) of A is 4% and the covariance between A and B is 0.24%. c. What is the expected return at equilibrium for a stock with a beta of 1.5 trading on this market? 00000s how would you construct an efficient portfolio on this

a. What is the beta of the investor's portf b. What amount has the investor placed in portfolio B? The risk (standard deviation) of A is 4% and the covariance between A and B is 0.24%. c. What is the expected return at equilibrium for a stock with a beta of 1.5 trading on this market? 00000s how would you construct an efficient portfolio on this

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13P

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