A portfolio that combines the risk-free asset and the market portfolio has an expected return of 9

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A portfolio that combines the risk-free asset and the market portfolio has an expected return of 9 percent and a standard deviation of 14 percent. The risk-free rate is 4.3 percent and the expected return on the market portfolio is 11.5 percent.

Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .29 correlation with the market portfolio and a standard deviation of 55 percent?

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Corporate Finance

ISBN: 9781265533199

13th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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