By using the capital asset pricing model and assuming that the market yielded an annual compound rate
Question:
By using the capital asset pricing model and assuming that the market yielded an annual compound rate of return of 7.4% over the past five years, has Patricia's stock portfolio, including the mutual fund, outperformed its expected return?
Economic Information
■ They expect inflation to average 3% (consumer price index) annually over both the short and long term.
■ They expect returns of 11% annually on the S&P 500 Index.
■ 90-day T-bills are currently yielding 2%.
■ Current mortgage rates are 4.25% for a fixed 15-year mortgage and 6% for a fixed 30-year mortgage.
■ Mortgage closing costs are expected to be 3% of any mortgage.
The beta is 1.08235821 or 1.0836 rounded
Macroeconomics Principles, Applications, and Tools
ISBN: 978-0132555234
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez