You are investing in a portfolio consisting two shares - D and E. You plan to invest 70% of your available funds in D and the balance in E. You will refer this portfolio as Portfolio F. The expected returns of each share, standard deviation of returns and beta of each of these shares, the market portfolio return (M) and the risk-free asset return (Rf), are shown in the table below Investment Expected return Standard deviation Beta D 6.75% 4.25% 1.3 E 2.46% 2.99% 0.7 F ? M 6.25% 5.75% Rf 2.20% c) What is the expected return on Portfolio F, based on the CAPM?
You are investing in a portfolio consisting two shares - D and E. You plan to invest 70% of your available funds in D and the balance in E. You will refer this portfolio as Portfolio F. The expected returns of each share, standard deviation of returns and beta of each of these shares, the market portfolio return (M) and the risk-free asset return (Rf), are shown in the table below Investment Expected return Standard deviation Beta D 6.75% 4.25% 1.3 E 2.46% 2.99% 0.7 F ? M 6.25% 5.75% Rf 2.20% c) What is the expected return on Portfolio F, based on the CAPM?
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:You are investing in a portfolio consisting two shares - D and E. You plan to invest 70% of your available funds in D and the balance in E. You will refer this portfolio as Portfolio F. The
expected returns of each share, standard deviation of returns and beta of each of these shares, the market portfolio return (M) and the risk-free asset return (Rf), are shown in the table below:
Investment
Expected return
Standard deviation
Beta
6.75%
4.25%
1.3
E
2.46%
2.99%
0.7
F
?
?
?
M
6.25%
5.75%
Rf
2.20%
?
?
Lin the -
tod r O ---
c) What is the expected return on Portfolio F, based on the CAPM?
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