4. What must be the beta of a portfolio with E(rP) = 20%, if rf = 5% and E(rM) =
Given: E(rP)=20%, rf=5% and E(rM)=15%
Formula: E(rP)=P*(E( rM ) rf ) + rf
Tutorial 2 Chapter 6
In forming a portfolio of two risky assets, what must be true of the correlation
coefficient between their returns if there are to be gains from diversification?
They nned to be negative -1 they have to be moving in opposit