Question: 8. Consider an asset with return Ri. Suppose that the variance of R; is 0.04 and that the market component of the variance of Ri

8. Consider an asset with return Ri. Suppose that the variance

8. Consider an asset with return Ri. Suppose that the variance of R; is 0.04 and that the market component of the variance of Ri is 0.03. Let Ng denote the risk-free return and assume that Mi = E(Ri) > Mf. a. Find the correlation of R and Rm, the return on the market portfolio b. If the Sharpe ratio of the market portfolio is 0.12, find Mi-Mifo

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