Question: E(ra) = rf + Ba1 x x1 + Ba2 x x2 12.4% = 3% + 0.5 x x1 + 0.9 x x2 E(rb) = rf

E(ra) = rf + Ba1 x x1 + Ba2 x x2

12.4% = 3% + 0.5 x x1 + 0.9 x x2

E(rb) = rf + Bb1 x x1 + Bb2 x x2

8% = 3% + 1 x x1 + -0.5 x x2

Not sure how to solve to get x1 and x2

6. Answer the following questions. 1) The standard deviation of market portfolio is 20%. The average risk aversion coefficient is 3. Risk free interest rate is 3%. Calculate the expected return of market portfolio at equilibrium

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