Suppose two stocks with betas A = 0.86 and BB = 0.86 and 8B = 1.20...

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Suppose two stocks with betas A = 0.86 and BB = 0.86 and 8B = 1.20 are correctly priced by the CAPM. If their expected returns are E(RA) = 8% and E(RB) = 10%, what is the expected return on the market portfolio? (Express your answer as a number rounded to four decimal places. For example, if the expected return on the market portfolio is 12.345%, you should enter 0.1235 as your answer.) Suppose two stocks with betas A = 0.86 and BB = 0.86 and 8B = 1.20 are correctly priced by the CAPM. If their expected returns are E(RA) = 8% and E(RB) = 10%, what is the expected return on the market portfolio? (Express your answer as a number rounded to four decimal places. For example, if the expected return on the market portfolio is 12.345%, you should enter 0.1235 as your answer.)

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The Capital Asset Pricing Model CAPM formula is ERi Rf betaiERm Rf Where ERi is the expected return ... View the full answer