The standard deviation of the return to the common stock of Boston Properties (BXP) is 53.6%. The standard deviation of the return to the market portfolio is only 15.2%. Running a market model regression of Boston Properties common stock returns against an intercept and the returns to the market portfolio, Boston Properties beta coefficient is estimated to be 0.93. Assume that there exists a risk-free asset which you may both lend and borrow at, and that the capital asset pricing model (CAPM) holds.

If you invested your entire wealth in Boston Properties common stock, would this represent an efficient portfolio? Why?

Answer rating: 100% (QA)

To determine if the portfolio is efficient we can use the Capital Market Line CML ... View the full answer