Question: The current expected return on the ABC stock is 10%, the riskless rate of interest is 2%, and the return on the market portfolio is

The current expected return on the ABC stock is 10%, the riskless rate of interest is 2%, and the return on the market portfolio is 8% and the standard deviation of returns on the market portfolio is 20%. The correlation between returns on the market portfolio and the ABC Corporation is 0.8

  1. According to CAPM, what is the current beta of ABC?
  2. What is the standard deviation of returns on the ABC Corporation?
  3. What will be the expected return on the ABC Corporation if its correlation with the market portfolio decreases to 0.15?

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