Consider an asset with return Ri Suppose that the variance of Ri is 0 04 and that the market component of the variance of Ri is 0 03 Let f denote the risk free return and assume that i E(Ri) f a Find the correlation of Ri and Rm, the return on the market portfolio b If the Sharpe ratio of the marke...

a The formula for the variance of a portfolio can be written as follows VarRp w12 VarR1 w22 VarR2 2w ...

Consider an asset with return Ri. Suppose that the variance of Ri is 0.04 and that the

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Consider an asset with return Ri. Suppose that the variance of Ri is 0.04 and that the market component of the variance of Ri is 0.03. Let μf denote the risk-free return and assume that μi ≡ E(Ri) > μf.

a. Find the correlation of Ri and Rm, the return on the market portfolio?

b. If the Sharpe ratio of the market portfolio is 0.12, find μi − μf .

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Probability And Statistics

ISBN: 9780321500465

4th Edition

Authors: Morris H. DeGroot, Mark J. Schervish

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Posted Date: Apr 07, 2023 02:01 AM

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Consider an asset with return Ri. Suppose that the variance of Ri is 0.04 and that the

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