Use the information provided in the table below to answer the following questions: Security A Security B
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Question:
Use the information provided in the table below to answer the following questions:
Security A | Security B | |
E(R) | 12% | 13% |
Standard Deviation | 0.021 | 0.029 |
Beta | 1.1 | 1.2 |
Variance of the market | 0.0002 | |
Correlation Coefficient (A, B) | 0.6 |
1. what is the covariance between security A and the market?
2. if the risk free rate is 8%, what is the expected return and variance of a portfolio containing 50% of the risk-free rate and 50% of the security B?
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