A Fund serves two types of investors: risk-taking and risk-averse investors by offering two portfolios: high-risk and low-risk. The broad stock market index is expected to increase by 16% and Government of Canada T-bills is projected to earn a yield of 3%. The consensus among investors is that the stock market will remain as volatile as the past year with a standard deviation of 25%. The low-risk portfolio has a standard deviation of 10%, while the high-risk portfolio has a standard deviation of 28%. Both portfolios are on the efficient frontier. 

What are the expected returns on these two portfolios based on the CAPM?

Answer rating: 100% (QA)

It is given in the question that Return on stock market Rm 16 Yield on TBills Rf ... View the full answer