Today, you observe the market portfolio has an expected return of 13 percent, with a standard deviation of 7 percent. The risk-free rate is 2 percent. If only the risk-free rate increases, will the composition of the market portfolio change? Will the expected risk and return on the market portfolio change? Explain your reasoning.
Answer to relevant QuestionsWhat is the beta of the following?a. Risk-free asset b. Market portfolio1. Which of the following statements is false?a. A spot price is a price today for immediate delivery.b. If a Canadian firm has to pay U.S. dollars in the future, it worries about the potential depreciation of the U.S. ...Suppose the spot exchange rate is C$1.4665 per €1, while the six-month forward rate is C$1.50 per euro. Suppose a firm expects to receive €100,000 in six months from a foreign customer and decides to eliminate its ...An investor enters into a short position in 50,000 futures contracts that requires a $50,000 initial margin and has a maintenance margin that is 75 percent of this amount. The futures price associated with this contract is ...Calculate the F1, F2, F3, given the following interest rates on zero couponbonds:
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