Explain Based on the CAPM what is the expected return on such an asset Is it

Explain based on the capm what is the expected return

This preview shows page 1 - 2 out of 2 pages.

Is it possible that a risky asset could have a beta of zero? Explain. Based on the CAPM, what is the expected return on such an asset? Is it possible that a risky asset could have a negative beta? What does the CAPM predict about the expected return on such an asset? Can you give an explanation for your answer? #4: A stock has a beta of 1.35 and an expected return of 16%. A risk-free asset currently earns 4.8%. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of 0.95, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 8%, what is its beta? d. If a portfolio of the two assets has a beta of 2.70, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
Image of page 1