Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Consider the information given in the Table 2A and complete Table 2B.
From the completed Table 2B, use the information to grpahically
present the Security Market Line (SML). Compute the slope of this
line.
Hints:
i) When 100% money is invested in asset X (portfolio weight =
1), the beta of the portfolio is 0.85
ii) Since the risk-free asset is, well, risk-free, its beta will
be zero
Transcribed Image Text:Table 2A
Expected return for asset x (%)
Risk free rate (%)
13
5
Beta of asset X 0.85
Proportion of portfolio
in Asset X
0.00
0.25
0.50
0.75
1.00
1.25
Table 2B
Expected
Portfolio
portfolio
beta
return
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