Suppose the risk-free rate is 3.9 percent and the market portfolio has an expected return of 11.2

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Suppose the risk-free rate is 3.9 percent and the market portfolio has an expected return of 11.2 percent. The market portfolio has a variance of .0460. Portfolio Z has a correlation coefficient with the market of .55 and a variance of .3017. According to the capital asset pricing model, what is the expected return on portfolio Z?
Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Corporate Finance Core Principles and Applications

ISBN: 978-0077905200

3rd edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford

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