The market portfolio has an expected return of 9 percent with a 10 percent volatility. The risk-free
Question:
The market portfolio has an expected return of 9 percent with a 10 percent volatility. The risk-free rate is 4 percent. A stock has a 20 percent volatility and a correlation coefficient of minus 0.10 with the market.
a. What is the stock’s beta? What does its sign indicate?
b. What is the stock’s expected return? Explain why it is lower than the risk-free rate.
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a The negative sign indicates that the stock returns have a tendency to move in the o...View the full answer
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