Assume that the CAPM holds, the risk free security is 10% (RF=10%) and that the Sharpe ratio

Fantastic news! We've Found the answer you've been seeking!

Question:

Assume that the CAPM holds, the risk free security is 10% (RF=10%) and that the Sharpe ratio for well diversify portfolio is 0.5. XYZ stock has a volatility of 90% and expected return of 20%.

What is the proportions of XYZ's variance which is diversified away in the market portfolio?

Related Book For answer-question

Corporate Finance

ISBN: 978-0133097894

3rd edition

Authors: Jonathan Berk and Peter DeMarzo

See More Books

Posted Date: May 08, 2023 03:09 AM

See More Questions

Your client's current portfolio is fully invested in a country index fund C with an expected return of rc=5% and a volatility of c=15%. The (global) market portfolio has an expected return of 8% and...
Using the CAPM and general financial reasoning explain why the market portfolios do or do not contain risk-free assets. ?
Water is flowing through a Tee in a horizontal plane as shown in Figure 3. Neglecting losses, calculate: (i) the pressure in pipes 2 and 3; (ii) the resultant force needed to hold the Tee in place....
Enviro-Tech has only two retail and two wholesale customers. Information relating to each customer for 2012 follows (in thousands): Enviro-Tech's annual distribution-channel costs are $33 million for...
Horizon Bancorp Inc. purchased a portfolio of trading securities during 2009. The cost and fair value of this portfolio on December 31, 2009, was as follows: On April 3, 2010, Horizon Bancorp Inc....
Prove the following by proof by cases: min(a, min(b, c)) = min(min(a, b), c) for real numbers a, b, c
A public accounting firm has been engaged to perform the audit of a local, federally funded Housing Allowance Program. The objective of the program is to increase the housing standards of Agana...
Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock as an available-for sale investment for $13,200. During the year, Sherman paid a cash dividend of $3.25 per share. At yearend,...
= Obara notices a kitten sitting on the ledge of a building, a height h 22 m off the ground. When the kitten loses its footing and begins to fall straight downward from rest, Obara sprints toward the...
Forecasting with the Parsimonious Method and Estimating Share Value Using the ROPI Model Following are income statements and balance sheets for Cisco Systems. Cisco Systems Consolidated Statements of...
Using the Internet, search for information on new network technologies or technologies being changed by networking that will drive the future. You may find information in news articles, blog posts,...
Most entrepreneurs use their own savings or borrow from family and friends to launch a start-up. How much capital could you possibly raise?
What are the various types of BPM activities?
Miguel and Juliana Santiago, ages 30 and 28, were recently married in Dallas. Miguel is an electrical engineer with Silicon Systems, a computer component design firm. Juliana has a masters degree in...
Who is the typical driver for each type of BPM activity?
Alex Evans has a personal automobile policy (PAP) with coverage of $25,000/$50,000 for bodily injury liability, $25,000 for property damage liability, $5,000 for medical payments, and a $500...
We make artificial heart valves. Our Total fixed costs is $500,000/month. Variable costs per unit is $4,000 and we are paid a price of $5,000. At what quantity of heart valves will we break even? b....
Prepare a stock card using the following information A company is registered for GST which it pays quarterly, assume GST was last paid on the 30th of June 2019. It uses weighted average cost...
Petron Corporations management team is meeting to decide on a new corporate strategy. There are four options, each with a different probability of success and total firm value in the event of...
In mid-2012, Apple had cash and short-term investments of $27.65 billion, accounts receivable of $14.30 billion, current assets of $51.94 billion, and current liabilities of $33.06 billion. a. What...
Garnet Corporation is considering issuing risk-free debt or risk-free preferred stock. The tax rate on interest income is 35%, and the tax rate on dividends or capital gains from preferred stock is...
The following information has been extracted from the financial statements and the notes of Champigon Ltd. Required (a) Calculate the following for 2023 to one decimal place: i. current ratio ii....
Comparative figures from the statement of financial position for Warder Ltd are shown below. Required (a) Prepare common size statements for the company for both years, and comment on what this...
The following information has been extracted from the financial statements and notes thereto of Bass and Dide Ltd, consultants. Required (a) Calculate the following ratios for 2025: i. return on...

Assume that the CAPM holds, the risk free security is 10% (RF=10%) and that the Sharpe ratio

Question:

Expert Answer:

To calculate the proportion of XYZs variance that is diversified away in the market portfolio we nee... View the full answer

Corporate Finance

Students also viewed these accounting questions