Portfolio-capital-asset-pricing model

Assignment Help Finance Basics
Reference no: EM1333211

A portfolio that combines the risk-free asset and the market portfolio has an expected return of 22% and a standard deviation of 5%. The risk-free rate is 4.9% and the expected return on the market portfolio is 19%. Assume the capital-asset-pricing model holds. What expected rate of return would a security earn if it had a 0.6 correlation with the market portfolio and a standard deviation of 3%?

a. Without showing mathematical calculations, explain in writing how you would solve the problem.

b. What financial concept or principle is the problem asking you to solve?

c. In the context of the problem scenario, what are some business decisions that a manager would be able to make after solving the problem?

d. Is there any additional information missing from the problem that would enhance the decision-making process?

Reference no: EM1333211

Reviews

Write a Review

 

Finance Basics Questions & Answers

  Explain valuation of bond for different ytms

Explain Valuation of bond for different YTMs compute the current price of the bonds if the present yield to maturity is 6 percent and 12 percent

  Discuss on performance metrics and conversion rate

Discuss on Performance metrics and Conversion rate and Abandonment rate & Return on investments, Potential ethical issues facing an e-business

  Present and future values with varying interest rates

If the interest rate this year is 7.2% and the interest rate next year will be 9.2%, what is future value of $1 after 2 years? What is present value of a payment of $1 to be received in 2 years?

  Depreciation is computed to the nearest month

Depreciation is computed to the nearest month and Bundy uses the midyear convention

  Computation of cost of equity and weighted average cost

Computation of cost of equity and weighted average cost of capital (WACC) and what conclusions can you draw from your results from Parts

  Objective type questions on bank reconciliation

Objective type questions on bank reconciliation and Combining the functions of signing checks with the approval of expenditures

  Determining the money multiplier

Assume the financial institutions are required to keep 11% in reserve and ratio of individuals' currency holdings to their deposits is 21%. What is money multiplier?

  Computation of irr and npv of the project

Computation of IRR and NPV of the project and decision making and which project should be adopted and Why

  Star wall street trader is negotiating his 1st contract

A star Wall Street trader is negotiating his 1st contract. His opportunity cost is= 10%. He has been presented the 3 year contracts which are given below.

  Calculation of market value of the firm

Calculation of market value of the firm and The marginal corporate tax rate is 34% and Firm C has a dividend pay-out ratio of 20% and a dividend growth rate of 8%

  Computing average collection period

What is the average collection period (AKA Days Sales Outstanding)? How is it computed? Why is it significant to firm?

  Forward and future contracts

Mike Lane will have $5 million to invest in five year U.S. Treasury bonds three months from now. Describe what action lane should take using five-year U.S. Treasury note futures contracts to protect against declining interest rates.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd