Question

You have been provided the following data about the securities of three firms, the market portfolio, and the risk-free asset: a. Fill in the missing values in the table. (Leave no cells blank - be certain to enter o wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Expected Return Standard Deviation Security Correlation* Beta Firm A 0.120 0.21 0.96 Firm B 0.40 0.130 1.51 Firm C The market portfolio 0.111 0.76 0.25 0.12 0.21 The risk-free asset 0.05 With the market portfolio b-1.What is the expected return of Firm A? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

A В D E F G 1 Security 2 a Standard deviaton Correlation Expected return Beta Firm A 0.120 0.21 0.96 0.96 Firm B 0.130 0.79 0.40 1.51 5 Firm C 0.111 0.76 0.25 0.90 The Market 6 0.120 0.21 0.00 1.00 7 The risk free asset 0.050 0.00 0.00 0.00 Pim * Oi Bi 9 От 10 11 12 b.1 Expected Return of Firm A 11.72% 13 14

Cell reference -

D24 A В с E F 1 Security Firm A 2 a Expected return Standard deviaton Correlation Beta =(F3*D6)/D3 0.12 0.21 (F4* D6)/E4 0.76 3 0.96 Firm B 1.51 0.13 0.4 (E5* D5)/D6 0.25 5 Firm C 0.111 The Market 6 0.12 0.21 1 0 The risk free asset 0 7 0.05 0 8 Pim * Oi Bi От 10 11 12 b.1 -С7+ғ3*(C6-C7) Expected Return of Firm A 13 14 15

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