Unformatted text preview: 40% with the market portfolio. There are other stocks in the market portfolio (and we do not know how many). (a) What is the riskfree rate? (b) What is the rewardtorisk ratio of the market portfolio (i.e., market excess return divided by market variance)? (c) Suppose Stock X has a beta of 2 and an expected return of 30%. What are the expected return on the market portfolio and the variance? (d) Draw the Security Market Line (SML) and label the axes. Show in the diagram where you would find Stocks A, B, and X, as well as the market portfolio. 3. Recommended Problems from the Textbook (BKM) CAPM Implications: Chapter 9 Problems 1019 (P.340341)...
View
Full
Document
This note was uploaded on 11/27/2011 for the course FINA 3104 taught by Professor Darwin during the Spring '11 term at HKUST.
 Spring '11
 Darwin
 Capital Asset Pricing Model

Click to edit the document details