The expected returns on Able Ltd, Blume Ltd and Cosmo Ltd can be explained fully by the Capital Asset Pricing Model The standard deviation of returns on the market portfolio is 25 The returns, standard deviation of returns and betas estimated for the companies are as follows Company Expected return Standard deviation Beta Able Ltd 24 31 1 2 Blume Ltd 14 42 0 5 Cosmo Ltd 18 35 0 78 Using this information determine the correlation coefficient between Cosmo Ltd and the Market Index You will need to use the data above to, firstly, calculate the expected return on the market portfolio and the risk free rate of interest

The Answer is in the image, click to view ...

Question: The expected returns on Able Ltd, Blume Ltd and Cosmo Ltd can be explained fully by the Capital Asset Pricing Model. The standard deviation of

The expected returns on Able Ltd, Blume Ltd and Cosmo Ltd can be explained fully by the Capital Asset Pricing Model. The standard deviation of returns on the market portfolio is 25%. The returns, standard deviation of returns and betas estimated for the companies are as follows:

Company	Expected return	Standard deviation	Beta
Able Ltd	24%	31%	1.2
Blume Ltd	14%	42%	0.5
Cosmo Ltd	18%	35%	0.78

Using this information determine the correlation coefficient between Cosmo Ltd and the Market Index. You will need to use the data above to, firstly, calculate the expected return on the market portfolio and the risk-free rate of interest.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Assume that the Capital Asset Pricing Model holds I he market portfolio has annual expected return of 10% and standard deviation 20%. The risk-free rate is 4%. An investor can freely borrow and lend...

Northern Virginia Community College HOW MUCH FINANCIAL RISK SHOULD YOU TAKE? Mark D. D'Antonio Nova Southeastern University FORT LAUDERDALE, FLORIDA, U.S.A. Abstract A successful retirement...

Please fill in the bottom table fully. Thank you! 7. The Capital Asset Pricing Model and the security market line Wilson holds a portfolio that invests equally in three stocks (wA WB wc /3). Each...

10. The Capital Asset Pricing Model and the security market line Wilson holds a portfolio that invests equally in three stocks (WA = WB = WC = 1/3). Each stock is described in the following table:...

7. The Capital Asset Pricing Model and the security market line Wilson holds a portfolio that invests equally in three stocks (WA = We = wc = 1/3). Each stock is described in the following table:...

9. The Capital Asset Pricing Model and the security market line Wilson holds a portfolio that invests equally in three stocks (WA = WB = Wc = 1/3). Each stock is described in the following table:...

10. The Capital Asset Pricing Model and the security market line Keith holds a portfolio that is invested equally in three stocks (WD = WA = WI = 1/3). Each stock is described in the following table:...

7. The Capital Asset Pricing Model and the security market line Wilson holds a portfolio that invests equally in three stocks (WA = We = wc = 1/3). Each stock is described in the following table:...

Ch 06: Assignment - Risk and Return 12. The Capital Asset Pricing Model and the security market line Wilson holds a portfolio that invests equally in three stocks (WA = WB = wc - 1/3). Each stock is...

Back to Assignment Attempts Attempt1 score is0.3 Average 0.3 out of 20.3 / 2 10. The Capital Asset Pricing Model and the security market line Keith holds a portfolio that is invested equally in three...

5. Find the linear operator on R2 that rotates by radians about the origin.

Paul Company includes three coupons in each package of crackers it sells. In exchange for 20 coupons, a customer will receive a cheese plate. Paul estimates that 30% of the coupons will be redeemed....

Spot and Forward Rates rates: On the same day, Desreumaux agrees to purchase 2 0 , 0 0 0 more watches in 3 months at the same price of 1 million Swiss francs. dollar. \ $ million should be entered as...

Aadaki bilgiler mevcuttur: Sat $ 600.000 Net gelir $ 30.000 Datlmam krlar $ 60.000 Ortalama Hisse Senedi zkaynaklar $ 200.000 Temettler $ 10.000 z sermaye getirisi nedir? ( Cevabnz en yakn tam sayya...

A Is it crucial that an employer know how long it took you to earn your B.A.? Is it unethical to simply note the date you finished it?

3. A member of a group you belong to suggests that everyone contribute $50 for a wedding present for another member. A. Wow, thats pretty generous! B. What specifically are we going to buy? C. Im...

4. Youre asked to give a speech about your athletic success to a high school sports team. A. Im no good at that sort of thing. B. What goal do you have in mind? C. I cant commit to speaking this fall.