3. The risk free rate is 2% and the expected return and standard deviation on the market is 12% and 20%, respectively. If the CAPM holds and the expected return on an efficient portfolio is 17%, A What is the portfolio's beta? B What is the portfolio's standard deviation? C What is the portfolio's correlation with the market?

Q: a) Suppose the risk-free rate is `X'% and the expected rate of return on the market portfolio is…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: 3. Asset 1 has an expected return of 10% with a standard deviation of 25%, and asset 2 has an…

A: To find the optimal portfolio consisting of risky assets and risk-free asset we can use the Capital…

Q: Consider two stocks A and B. Both have an expected return of 10%, and their standard deviations are…

A: The process of choosing a mix of securities or assets that optimizes returns for a given level of…

Q: 4. Suppose that there are 2 assets with ri 012 = 0.005. = 0.20, 01 = = 0.40, 2 = 0.10, 02 = 0.25 and…

A: The objective of the question is to calculate the market portfolio return and variance, and the…

Q: the simple is valid and all portfolios are priced correct hich of the situations below is possible?…

A: Capital Asset Pricing Model:It is a financial model that estimates an investment's or asset's…

Q: 1. Consider the table below which lists a set of portfolios with each of their expected return E(R)…

A: To create the efficient frontier, we plot the expected return (E(R)) on the y-axis and the standard…

Q: 1. Consider the table below which lists a set of portfolios with each of their expected return E(R)…

A: To plot the portfolios and create the efficient frontier, we plot the expected return (E(R)) on the…

Q: The expected return and standard deviation of Stock A are 12% and 24%, respectively. The expected…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Calculate Stock B’s beta.     b. If Stock B’s beta were 0.80, what would be its new rate of return?

A: Information Provided: Risk free rate of return = 2% Market return = 7% Stock B's return = 11%

Q: Consider portfolio x with a beta of 1.3 and standard deviation of 25%. If the standard deviation of…

A: The portfolio will be considered as efficient or optimal if the standard deviation for the portfolio…

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Q: If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below…

A: A model that helps the investors find the right value of returns to be expected, is known as the…

Q: ider an asset with a beta of 1.2, a risk-free rate of 4.3%, and a market return of 12%. What is the…

A: Given, Beta = 1.2 Risk free rate = 4.3% Market return = 12%

Q: Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 7% 0%…

A: Sharpe ratio refers to the return provided by a portfolio after it has been adjusted for the…

Q: Use the following CAPM equation for a portfolio to answer the questions that follow: E(RP) = RF + βP…

A: Here, E(RP) is 4.2% RF is 1 % βP is 0.8 RM is 5% Actual Portfolio Return is 6%

Q: Which statement is correct? O The collection of all portfolios that minimize variance for varying…

A: Since you have posted multiple questions, we are solving the first question for you. Kindly repost…

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A: Formulas: Expected return on A = risk free rate + Beta on M1 x risk premium f1 + Beta on M2 x risk…

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A: Portfolio standard deviation is the standard deviation of all the different investments in the…

Q: Table 1 shows the value of a portfolio consisting of security 1 and security 2. The respective…

A: Standard deviation is a statistical measurement of deviation from the expected data. It shows market…

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A: Portfolio means a bunch of assets or investments. To maximize the profits, investors invest their…

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A: The portfolio beta will be reflective of the systematic risk associated with a particular asset and…

Q: *Stock A has a beta of 1.3 and an expected return of 10.2. Stock B has a beta of 0.8 and an expected…

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Q: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation…

A: To know the riskiness between the two projects, Coefficient of variation gives good results. Higher…

Q: Baghiben

A: The objective of the question is to determine the percentage of Portfolio Y's return that is driven…

Q: Portfolio  Suppose      rA ~ N (0.05, 0.01), rB ~ N (0.1, 0.04) with pA,B = 0.2 where rA and rB…

A: Variance = SD2  Expected return = ∑weight*return CCR is (return, standard deviation)

Q: Suppose the risk free rate is 5% and the market portfolio has an expected return of 10%. Portfolio Z…

A: Beta assesses a stock's volatility relative to the broader market, focusing on systematic risk. It…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

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.