The Capital Asset Pricing Model 4. Assume the risk free rate equals Rf = 4%, and the return on the market portfolio has expectation E[RM] = 12% and standard deviation σM = 15%. (a) What is the equilibrium risk premium (that is, the excess return on the market portfolio)? (b) If a certain stock has a realized return of 14%, what can we say about the beta of this stock? (c) If a certain stock has an expected return of 14%, what can we say about the beta of this stock?
The Capital Asset Pricing Model 4. Assume the risk free rate equals Rf = 4%, and the return on the market portfolio has expectation E[RM] = 12% and standard deviation σM = 15%. (a) What is the equilibrium risk premium (that is, the excess return on the market portfolio)? (b) If a certain stock has a realized return of 14%, what can we say about the beta of this stock? (c) If a certain stock has an expected return of 14%, what can we say about the beta of this stock?
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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4. please help and explain
![The Capital Asset Pricing Model
4. Assume the risk free rate equals Rf = 4%, and the return on the market portfolio has
expectation E[RM] = 12% and standard deviation σM = 15%.
(a) What is the equilibrium risk premium (that is, the excess return on the market
portfolio)?
(b) If a certain stock has a realized return of 14%, what can we say about the beta
of this stock?
(c) If a certain stock has an expected return of 14%, what can we say about the beta
of this stock?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F99d6c510-5b8c-4c17-ac3a-87bddda960ff%2Ff1ca8a24-83f9-4dbf-a188-8fe617f94bf3%2Fz5mcwt_processed.png&w=3840&q=75)
Transcribed Image Text:The Capital Asset Pricing Model
4. Assume the risk free rate equals Rf = 4%, and the return on the market portfolio has
expectation E[RM] = 12% and standard deviation σM = 15%.
(a) What is the equilibrium risk premium (that is, the excess return on the market
portfolio)?
(b) If a certain stock has a realized return of 14%, what can we say about the beta
of this stock?
(c) If a certain stock has an expected return of 14%, what can we say about the beta
of this stock?
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