Mathematics Homework Solutions
#77394
Portfolio
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 25 percent and a standard deviation of 4%. The risk-free rate is 5%, and the expected return on the market portfolio is 20%. Assume the capital-asset-pricing model holds. What expected rate of return would a security earn if it had a 0.5 correlation with the market portfolio and a standard deviation of 2%?
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