Suppose there are two independent economic factors, M, and M2. The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 52%. Portfolios A and Bare both well diversified. Portfolio Beta on M, Beta on M2 Expected Return (%) 31 12 A 1.6 2.4 2.5 -0.7 B What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decin places.)
Suppose there are two independent economic factors, M, and M2. The risk-free rate is 5%, and all stocks have independent firm-specific components with a standard deviation of 52%. Portfolios A and Bare both well diversified. Portfolio Beta on M, Beta on M2 Expected Return (%) 31 12 A 1.6 2.4 2.5 -0.7 B What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decin places.)
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
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Suppose there are two independent economic factors, M, and M2. The risk-free rate is 5%, and all stocks have independent firm-specific
components with a standard deviation of 52%. Portfolios A and B are both well diversified.
Portfolio
Beta on M,
Beta on M2
Expected Return (%)
31
12
A
1.6
2.4
2.5
в
-0.7
What is the expected return-beta relationship in this economy? (Do not round intermediate calculations. Round your answers to 2 decimal
places.)
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