Suppose the total risk of Portfolios A, B and C are 49%, 64%7 and 100% respectively. The

Suppose the total risk of Portfolios A, B and C are 49%⅔, 64%7 and 100% respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100%? respectively.

(b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %?.

(c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100%?) as the Market

Portfolio? Why or Why not?

Answer rating: 100% (QA)

To calculate the beta of Portfolio C we can use the Capital Asset Pricing Model CAPM formula which r... View the full answer