Security A has an expected return of 12.4% with a standard deviation of 15%, and...
90.2K
Verified Solution
Link Copied!
Question
Finance
Security A has an expected return of 12.4% with a standard deviation of 15%, and a correlation with the market of 0.85. Security B has an expected return of ?0.73% with a standard deviation of 20%, and a correlation with the market of ?0.67. The standard deviation of rM is 12%.
a. To someone who acts in accordance with the CAPM, which security is more risky, A or B? Why? (Hint: No calculations are necessary to answer this question; it is easy.)
b. What are the beta coefficients of A and B? Calculations are necessary.
c. If the risk-free rate is 6%, what is the value of rM?
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: Zin AI - Your personal assistant for all your inquiries!
