Assume that the short-term risk-freerate is 3%, the market index S&P500 is expected to pay returns of 15% with the standard deviation equal to 20%. Asset A pays on average 5%, has standard deviation equal to 20% and is NOTcorrelated with the S&P500. Asset B pays on average 8%, also has standard deviation equal to 20% and has correlationof 0.5 with the S&P500. Determine whether asset A and B are overvalued or undervalued, and explain why.

Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is foundto be half of the required return (RB) on stock B. The risk-free rate (Rf) is one-fourth of the requiredreturn on A. Return on market portfolio is denoted by RM. Find the ratio of beta of A (A) to beta of B(B). d) Assume that the short-term risk-free rate is 3%, the market index S&P500 is expected to payreturns of 15% with the standard deviation equal to 20%. Asset A pays on average 5%, has standarddeviation equal to 20% and is NOT correlated with the S&P500. Asset B pays on average 8%, also hasstandard deviation equal to 20% and has correlation of 0.5 with the S&P500. Determine whetherasset A and B are overvalued or undervalued, and explain why. (Hint: Beta of asset i (??) =???????, where ??,?? are standard deviations of asset i and marketportfolio, ??? is the correlation between asset i and the market portfolio)Question 2. Foreign exchange marketsStatoil, the national…

The following expected return and the standard deviation of current returns are known:   Security (i) Expected Return Standard Deviation βi A 0.20 0.12 1.1 B 0.12 0.10 0.8 T-Bills 0.05 0 0 Market Portfolio 0.20 0.15 1 Required: Determine which of A or B is over-valued or undervalued.

Assume that using the Security Market Line(SML) the required rate of return(RA)on stock A is found to be halfof the required return (RB) on stock B. The risk-free rate (Rf) is one-fourthof the required return on A. Return on market portfolio is denoted by RM. Find the ratioof betaof A(A) tobeta of B(B). Thank you for your help.

Asset W has an expected return of 12.6 percent and a beta of 1.25. If the risk-free rate is 4.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Leave no cells blank be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your expected returns as a percent rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places, e.g., 32.161.) Percentage of Portfolio in Asset W 0% 25 50 75 100 125 150 - Slope of the line Portfolio Expected Return % % % % % % % If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Portfolio Beta %

Asset W has an expected return of 13.4 percent and a beta of 1.6. If the risk-free rate is 5.0 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations and enter your expected return answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 3 decimal places, e.g., 32.161.)   Asset W has an expected return of 13.4 percent and a beta of 1.6. If the risk-free rate is 5.0 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations and enter your expected return answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 3 decimal places, e.g., 32.161.)

Assume that the short-term risk-free rate is 6%, the market index S&P500 is expected to pay returns of 30% with the standard deviation equal to 40%. Asset A pays on average 10%, has a standard deviation equal to 40% and is NOT correlated with the S&P500. Asset B pays on average 16%, also has a standard deviation equal to 40% and has a correlation of 1 with the S&P500. Determine whether asset A and B are overvalued or undervalued, and explain why.  (Beta of asset i (?i) = ?i ?iM / ?M, where ?i, ?M are standard deviations of asset i and market portfolio, ?iM is the correlation between asset i and the market portfolio)

Portfolio theory with two assets E(R1)=0.15 E(01)= 0.10 W1=0.5 E(R2)=0.20 E(02) = 0.20 W2=0.5 Calculate the expected return and the standard deviation of the two portfolios if r1,2 = 0.4 and -0.60 respectively.

Consider two types of assets: market portfolio (M) and stock A. The expected return is 8% and standard deviation of the market portfolio is 15%. The risk-free rate is 2%. The standard deviation of market portfolio returns is 15%. The standard deviation of stock A is 30%, and the beta coefficient is 1.   Draw the capital market line and show the position of stock A.

A single mispriced asset has an alpha a = 3.0%, a beta ẞ = 1, and unsystematic risk σ² = 9%. The market risk premium is 5.0% and the market's standard deviation is 0.1. What is the information ratio of the mispriced asset? In constructing an optimal allocation between this mispriced asset and the market portfolio, what proportion of your investment would you place in the mispriced asset? Oa. 0.1; 6.67% O b. 0.33; 6.67% O c. 0.33; 6.90% O d. 0.1; 66.67% O e. 0.1; 6.90%