Question: You have the following information: Security Expected Return Standard Deviation Beta A 17% 30% 1.375 B 11% 20% 1.000 Market portfolio 12% 18% Risk-free Asset

You have the following information:

Security Expected Return Standard Deviation Beta
A 17% 30% 1.375
B 11% 20% 1.000
Market portfolio 12% 18%
Risk-free Asset 3%
  1. Given the CAPM, are both A and B attractive investment options? Explain.
  2. What is the portfolio expected return, portfolio standard deviation and the portfolio beta if you invest 80% in A and 20% in the risk-free asset?

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