A portfolio that combines the risk-free asset and the market portfolio has an ex

Question

A portfolio that combines the risk-free asset and the market portfolio has an expected return of 9 percent and a standard deviation of 13 percent. The risk-free rate is 5 percent, and the expected return on the market portfolio is 12 percent. Assume the capital asset pricing model holds.

What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 40 percent? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

What expected rate of return would a security earn if it had a .45 correlation with the market portfolio and a standard deviation of 40 percent? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

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