Question: The table below provides information on two (2) individual risky assets A, the market portfolio M and the risk-free assets F. Asset Expected Return Standard

The table below provides information on two (2) individual risky assets

A, the market portfolio M and the risk-free assets F.

Asset Expected Return Standard deviation

A 7.5% 50%

M 6% 25%

F 3% 0%

Calculate the following:

a. Systematic risk of asset A

b. Sharpe ratio and Treynor ratio of asset A, assume that the realised return is the same as the expected return for all assets.

c. Suppose you want to construct an equally weighted portfolio between assets A and F. Determine the return, total risk (standard deviation) and systematic risk (beta) of your portfolio.

d. According to the "Capital Asset Pricing Model", the best measure of risk for an individual asset is the standard deviation of its returns. Do you agree or disagree with this statement? Explain.

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