Question: The market index has average return 7% and standard deviation 30%. The risk-free rate is 3%. A portfolio has beta 1.4, unsystematic variance of 0.03,

The market index has average return 7% and standard deviation 30%.

The market index has average return 7% and standard deviation 30%. The risk-free rate is 3%. A portfolio has beta 1.4, unsystematic variance of 0.03, and an M2-measure of -0.01. What is the average return on the portfolio? (9 marks)

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