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1) If the beta of the market index is 1.0 and the standard deviation of the market index increases from 12% to 18%, what is the beta of the market index following this increase?
2) The security market line represents __________
A. the risk-return for all portfolios which can be constructed from the risk-free investment and the optimal risky portfolio
B. the relationship between beta and expected return
C. the relationship between an investment’s return and the return on an index
D. the relationship between an investment's return and the return on a negative beta portfolio
1) Beta of Market remains same irrespective of the standard
deviation of the market.
Hence Option b Beta = 1.0
2) Option b relation between beta and expected return, Expected Return is on y axis and beta is on x axis is SML line
1) If the beta of the market index is 1.0 and the standard deviation of the...
Expected Portfolio Return Beta 22 0.8 A Market 173 1.0 D) Expected Portfolio Return Beta 30.28 1.8 A Market 198 1.0 If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5% A) Expected Portfolio Return Beta 198 0.8 Market 198 1.0 B) Expected Standard Return Deviation Portfolio 228 88 A Market 17B 168
Asset W has an expected return of 12.3 percent and a beta of 1.2. If the risk-free rate is 4 percent, complete the following table for portfolios of Asset W and a risk-free asset. Consider the relationship between portfolio expected return and portfolio beta. What is the slope of the security market line (SML)?
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Compute the expected return, standard deviation, beta, and nonsystematic standard deviation of the portfolio. 4. Assume that the total market value of an initial portfolio is $300,000. Suppose that the owner of this portfolio wishes to decrease risk by reducing the allocation to the risky portfolio from y = 0.7 to y = 0.56. How do you reallocate your risky portfolio? 5. Which of the following factors reflect pure market risk for a given corporation? a. Increased short-term interest rates....
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ve 3.24 The risk-free ering the following investments. free rate is currently 3%, and the market return is 10%. Assume you are consid- Beta Investment 1.5 1.0 0.75 0.0 b. Use the capital asset pricing a. Which investment is most risky? Least risky? b. Use the capital asset pricing model to find the required return on each of the investments. c. Using your findings in part b, draw the security market line. d. On the basis of your findings in...
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