A portfolio that combines the risk-free asset and the


A portfolio that combines the risk-free asset and the market portfolio has an expected return of 8 percent and a standard deviation of 11 percent. The risk-free rate is 5 percent, and the expected return on the market portfolio is 13 percent. Assume the capital asset pricing model holds.

What expected rate of return would a security earn if it had a .55 correlation with the market portfolio and a standard deviation of 56 percent?

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Financial Management: A portfolio that combines the risk-free asset and the
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