Suppose I fit the CAPM model for Apple stock using the market portfolio and the estimation result is as below: rApple = 0.03 + 2*r Market + E If you would like to construct a portfolio with zero market beta with positive average return, how would you like to invest using the Apple stock and the market portfolio? O None of the other answers are correct. O Short sell $100 of market portfolio and long $50 of Apple and $50 of lending O Long $100 of Apple and short sell $50 of market portfolio and $50 of borrowing O Long $100 of market portfolio and short sell $50 of Apple and $50 of borrowing Short sell $100 of Apple and long $50 of market portfolio and $50 of lending
Suppose I fit the CAPM model for Apple stock using the market portfolio and the estimation result is as below: rApple = 0.03 + 2*r Market + E If you would like to construct a portfolio with zero market beta with positive average return, how would you like to invest using the Apple stock and the market portfolio? O None of the other answers are correct. O Short sell $100 of market portfolio and long $50 of Apple and $50 of lending O Long $100 of Apple and short sell $50 of market portfolio and $50 of borrowing O Long $100 of market portfolio and short sell $50 of Apple and $50 of borrowing Short sell $100 of Apple and long $50 of market portfolio and $50 of lending
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Suppose I fit the CAPM model for Apple stock using the market portfolio and the estimation result is as below:
rApple = 0.03 + 2*rMarket + Ɛ
If you would like to construct a portfolio with zero market beta with positive average return, how would you like to invest using
the Apple stock and the market portfolio?
O None of the other answers are correct.
Short sell $100 of market portfolio and long $50 of Apple and $50 of lending
O Long $100 of Apple and short sell $50 of market portfolio and $50 of borrowing
O Long $100 of market portfolio and short sell $50 of Apple and $50 of borrowing
O Short sell $100 of Apple and long $50 of market portfolio and $50 of lending
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