Assume that the expected market return is 12% and volatility is 20%. Assume that the CAPM accurately
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Question:
(a) What is the covariance between IBM and the market?
(b) What is the ???? of IBM?
(c) What is IBM's expected return?
(d) What percentage of IBM's total variance risk is known to be specific (non-systematic)?
(e) Assume that you want to take 15% risk on your portfolio. If you invest only in IBM and risk-free assets, what is the best you can do?
(f) How much improvement would you get if you added a market portfolio to (e)?
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
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