Question: 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

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 A 10% 0.8 0.000784
B 11% B 1.2 0.019264
C 12.5% C 1.5 0.0037
Riskfree rf 0% 0.00 0.0000
Market M M 1.00 0.0000

Find the unknowns in the above table. [6 marks]

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