Question: Assume that the Nespas portfolio for equities allocates 80 per cent to the XMAN index and 20 per cent to the AEX index. This Nespas

Assume that the Nespas portfolio for equities allocates 80 per cent to the XMAN index and

20 per cent to the AEX index. This Nespas portfolio has an expected return of 13 per cent

per year and a standard deviation of 8.8 per cent per year. The beta for the XMAN index,

computed with respect to this Nespas portfolio, is 0.54. Compute the expected return of

theXMANindex, assuming that this 80/20 per cent mix really is the Nespas portfolio when

the risk-free rate is 5 per cent.

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