The beta of gold relative to the market portfolio is 0 3 The risk free rate is 7 percent, and the market risk premium is 4 percent a What is the expected return on gold based on the capital asset pricing model (CAPM) b Give an intuitive explanation for the magnitude of the expected return on gold ...

a The expected return on gold as theoretically derived by the CAPM is E Rgold 7 b gold ...

The beta of gold relative to the market portfolio is -0.3. The risk-free rate is 7 percent,

Question:

The beta of gold relative to the market is -0.3. The risk-free rate is 7 percent, and the market risk premium is 4 percent.
a. What is the on gold based on the (CAPM)?
b. Give an intuitive explanation for the magnitude of the on gold.
Capital Asset Pricing Model
The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. The CAPM is a model for pricing an individual security or portfolio. For individual securities, we make use of the security market line (SML) and its... 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...