Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. suppose the capital asset pricing model (capm) hol

Suppose the Capital Asset Pricing Model (CAPM) holds. The market premium is 8% and the...

80.2K

Verified Solution

Question

Finance

image

Suppose the Capital Asset Pricing Model (CAPM) holds. The market premium is 8% and the standard deviation of the market portfolio is 20%. Stock A has a beta of 2 and Stock B has a beta of 1. The diskforarate is 2%. (a) (2 points) Calculate the expected returns of Stock A and Stock B. (b) (4 points) Do we have enough information to calculate the correlation between Stock A and Stock B? Briefly explain. (c) (4 points) Do we have enough information to calculate the correlation between A and B, if they are well-diversified portfolios (i.e., diversifiable risk is negligible) instead of stocks? Briefly explain

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

Finance
1.2K views

What are some of the differences in estimating the benefits for CRM investments versus determining the...

Medical Sciences
1.2K views

What role does the liver play in digestion (list and explain 3 or more things...

Civil Engineering
1.2K views

Discuss the mechanisms of permeability and hydraulic gradients and their effect on groundwater movement.

Psychology
1.2K views

Write a paper about a self-introduction speech. 1.What is public speaking? 2.Why do you choose this course? 3.How...

Basic Math
1.2K views

On the Unit Circle List the angles whose measure is a non reducible increment of...

Basic Math
1.2K views

The ages of the winners of a cycling tournament are approximately bell-shaped. The mean age...

Calculus
1.2K views

Let an 4n 2n 1 a Determine whether a is convergent O convergent O divergent...

Algebra
1.2K views

Tak Juan and Julissa were waiting in line at the movie theater and decided to...

Algebra
1.2K views

Which type of variation is represented by the following e M2 1 2 131 inverse...

Algebra
1.2K views

Consider the following planes 5x y z 5 15x 3y 5z 25 e Find the...

Accounting
1.2K views

Fixed assets with focus on: - definition and classification of fixed assets - valuation of...

Finance
1.2K views

Given the cash inflow in the following: Year 1: $3,000 Year 2 : $8,000 Year...