Question: 9. You know the correlation between assets ABC and XYZ is 0.9. You know the standard deviation of the returns of company ABC is 20%.

9. You know the correlation between assets ABC and XYZ is 0.9. You know the standard deviation of the returns of company ABC is 20%. The standard deviation of the market portfolio is 40%. (a) What is the of company ABC? (b) What is the expected return on that company if rm = 20%, and rf = 5%.

10. You have asset ABC. Its covariance with the market portfolio is 0.01. The expected price of the market portfolio is $120. Its current price is $100. The standard deviation of the market portfolio returns is 20%. The risk free rate is 5%. (a) What is the expected return of company ABC? (b) What is the expected return of company XYZ if the covariance of its returns with the market is 0.05?

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