Assume the CAPM holds. You are holding a portfolio with the beta of 0.9 and the standard deviation of 40%. The expected return on the market portfolio is 10% and the standard deviation of returns on the market portfolio is 16%. The risk-free rate is 3.5%. How much more expected return without increase in the risk of your portfolio can you earn if you make your portfolio efficient? Options: 8.60% more than I earn now 11.35% more than I earn now My portfolio is already efficient, I cannot earn more without increasing the risk of my portfolio 10.40% more than I earn now 13.15% more than I earn now
Assume the CAPM holds. You are holding a portfolio with the beta of 0.9 and the standard deviation of 40%. The expected return on the market portfolio is 10% and the standard deviation of returns on the market portfolio is 16%. The risk-free rate is 3.5%. How much more expected return without increase in the risk of your portfolio can you earn if you make your portfolio efficient? Options: 8.60% more than I earn now 11.35% more than I earn now My portfolio is already efficient, I cannot earn more without increasing the risk of my portfolio 10.40% more than I earn now 13.15% more than I earn now
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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Transcribed Image Text:Assume the CAPM holds. You are
holding a portfolio with the beta of 0.9
and the standard deviation of 40%.
The expected return on the market
portfolio is 10% and the standard
deviation of returns on the market
portfolio is 16%. The risk-free rate is
3.5%. How much more expected
return without increase in the risk of
your portfolio can you earn if you
make your portfolio efficient?
Options:
8.60% more than I earn now
11.35% more than I earn now
My portfolio is already efficient, I
cannot earn more without
increasing the risk of my portfolio
10.40% more than I earn now
13.15% more than I earn now
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