Suppose a market expected return of 10 and a riskless rate


Suppose a market expected return of 10% and a riskless rate of 6%. Assume the CAPM. A) Assume both borrowing and lending are possible at the riskless rate. Show how an investor can achieve a portfolio with 1.0 beta by i. only taking positions in a riskless security and a portfolio with beta 0.8; ii. only taking positions in a riskless security and a portfolio with beta 1.5.

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Financial Management: Suppose a market expected return of 10 and a riskless rate
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