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Unformatted text preview: H AAS S CHOOL OF B USINESS U NIVERSITY OF C ALIFORNIA AT B ERKELEY BA 103 A VINASH V ERMA H OMEWORK 12 : D UE A UGUST 9 2011 1. Assume that the CAPM holds. E p R f σ p M (Market Portfolio) Security i Portfolio a Portfolio q Security j Security k 1.1. Indicate whether the following statements are true or false based on what you can infer from the graph above without scaling it . (a). Portfolio q has no diversifiable risk. (b). 1 = aM β . (c). Portfolio q is a portfolio in which we have invested positive amounts both in the risk free asset and in the market portfolio. (d). Security i has no systematic risk. (e). M a aM σ σ σ * = . (f). 2 M kM σ σ (g). 0< ρ qM <1 1.2. Work out answers to the following based on the graph above. (h). You are given that ) ( * 4 f j f M R E R E- =- . What percentage of the total risk of Security j as measured by the variance on returns on Security j can be diversified away?...
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This note was uploaded on 09/11/2011 for the course UGBA 103 taught by Professor Berk during the Summer '07 term at Berkeley.
- Summer '07