2. Specify the composition of a portfolio consisting of the CAC 40 and the risk-free asset that will produce an expected return of 10%. Contrast the risk on this portfolio with the risk of Renault.

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The expected rates of return on the French firms Publicis and Renault, the market port- folio (CAC 40) and the risk-free asset are given below, along with the standard deviations of these returns Asset Expected return Standard Deviation (%) Publicis 17 40 Renault 10 20 CÁC 40 14 17 Risk free asset 3 0 1. Assuming that the returns are explained by the capital asset pricing model, specify the betas or Publicis and Renault, and the risk of a portfolio of Publicis and Renault with an expected return the same as the CAC 40. The expected rates of return on the French firms Publicis and Renault, the market port- folio (CAC 40) and the risk-free asset are given below, along with the standard deviations of these returns Asset Expected return Standard Deviation (%) Publicis 17 40 Renault 10 20 CÁC 40 14 17 Risk free asset 3 0 1. Assuming that the returns are explained by the capital asset pricing model, specify the betas or Publicis and Renault, and the risk of a portfolio of Publicis and Renault with an expected return the same as the CAC 40.

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Quiz 1 The expected rates of return on the French firms Publicis and Renault the market portfolio CA... View the full answer