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What is a Portfolio?

What expected rate of return would a security earn if it had a 0.6 correlation with the market portfolio and a

  • A portfolio that combines the risk-free asset and the market portfolio has an expected returnof 22 percent and a standard deviation of 5 percent. The risk-free rate is 4.9 percent, and the expected return on the market portfolio is 19 percent. Assume the capital-asset-pricingmodel holds. What expected rate of return would a security earn if it had a 0.6 correlation with the market portfolio and a standard deviation of 3 percent?

  • Answer:

    I think there is one piece of information missing here regarding ratio of the market portfolio and risk-free asset in the portfolio. However, the expected return of the security is 11.056%

Demetria F at Yahoo! Answers Visit the source

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I am not sure but it should be nearly 7.2%.

faltu

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