Suppose you group all the stocks in the world into mutually exclusive portfolios (each stock is in only one portfolio): growth stocks and value stocks. Suppose the two portfolios have equal size (in terms of total value), a correlation of 0.5, and the following characteristics: The risk free-rate is 4%. a. What is the expected return and volatility of the market portfolio (which is a 50-50 combination of the two portfolios)? b. Calculate the Sharpe ratios of the value stock, growth stock, and market portfolio. c. Does the CAPM hold in this economy? (Hint: Is the market portfolio efficient?) ... a. What is the expected return and volatility of the market portfolio (which is a 50-50 combination of the two portfolios)? The expected return of the market portfolio is %. (Round to one decimal place.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Expected Return 15% 16% Volatility 12% 29% Value Stocks Growth Stocks Print Done X

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