Question: Q2. Suppose that the relevant equilibrium model is the CAPM with unlimited borrowing and lending at the riskless rate of interest. Asset Expected Return Standard

Q2. Suppose that the relevant equilibrium model is the CAPM with unlimited borrowing and lending at the riskless rate of interest.

Asset

Expected Return

Standard Deviation

Beta

Residual Variance

A

16%

A

1.00

0.0100

B

20%

B

1.50

0.0144

C

C

10%

0.75

0.0064

Riskfree

rf

0%

0.00

0.0000

Market

M

M

1.00

0.0000

Find the unknowns in the above table.

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