You also know that an efficient portfolio has and expected


You wish to calculate the equilibrium expected return for Stock I, E(R. You assume that the capital asset pricing model holds. You know that the risk-free return is 0.01 (1%), the market risk premium is 0.07, and the covariance between the return on Stock I and the market portfolio is 0.08. You also know that an efficient portfolio has and expected return of 0.0625 and a return standard deviation of 0.15. What is the expected return on Stock I?

a. 0.0450

b. 0.1150

c. 0.1500

d. 0.1733

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Financial Management: You also know that an efficient portfolio has and expected
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