Table 2A Expected return for asset x (%) Risk free rate (%) 13 5 Beta of asset X 0.85 Table 2B Expected portfolio Portfolio beta return Proportion of portfolio in Asset X 0.00 0.25 0.50 0.75 1.00 1.25
Table 2A Expected return for asset x (%) Risk free rate (%) 13 5 Beta of asset X 0.85 Table 2B Expected portfolio Portfolio beta return Proportion of portfolio in Asset X 0.00 0.25 0.50 0.75 1.00 1.25
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
Related questions
Question
Consider the information given in the Table 2A and complete Table 2B. From the completed Table 2B, use the information to graphically 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
Table 2B
Expected
portfolio
Portfolio
beta
return
Proportion of portfolio
in Asset X
0.00
0.25
0.50
0.75
1.00
1.25
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