An individual common stock has a beta of 0.9 and a correlation coefficient of 0.9. The expected return of the stock is 20%, and the standard deviation of its returns is 12%. If a risk-free asset has an expected return of 4%, then: a) the expected return on the market portfolio is 22%. b) the market returns standard deviation is 12%. c) the beta of the market returns is 0.9. d) both a) and b) are true. e) both a) and c) are true. Pls show procedure, thanks
An individual common stock has a beta of 0.9 and a correlation coefficient of 0.9. The expected return of the stock is 20%, and the standard deviation of its returns is 12%. If a risk-free asset has an expected return of 4%, then: a) the expected return on the market portfolio is 22%. b) the market returns standard deviation is 12%. c) the beta of the market returns is 0.9. d) both a) and b) are true. e) both a) and c) are true. Pls show procedure, thanks
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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An individual common stock has a beta of 0.9 and a correlation coefficient of 0.9. The expected return of the stock is 20%, and the standard deviation of its returns is 12%. If a risk-free asset has an expected return of 4%, then:
a) the expected return on the market portfolio is 22%.
b) the market returns standard deviation is 12%.
c) the beta of the market returns is 0.9.
d) both a) and b) are true. e) both a) and c) are true.
Pls show procedure, thanks
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