Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. part a woolworths ltd has a beta of 0.90. if the

Part A Woolworths Ltd has a beta of 0.90. If the market risk premium...

90.2K

Verified Solution

Question

Accounting

Part A

Woolworths Ltd has a beta of 0.90. If the market risk premium is 6% and the risk-free rate is 3%, what is the expected return for CSL Ltd according to CAPM?

Part B

Can a portfolio standard deviation be less than the standard deviation of every asset in the portfolio? If yes, please give an example.

Part C

There are two stocks in your portfolio. Stock Weight E(r) Standard Variance A 50% 10% 6% B 50% 20% 12%

a) Assume stock A and B have a correlation of 0.5, calculate the risk and return for your portfolio.

b) Repeat (a), assume the correlation is -0.5. Why is the risk now lower in (b) than in (a)?

c) Will you invest in Stock A alone if the correlation between A and B is -0.5?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students