If the rate of return on risk-free asset is 5% and you expect market return to be 14%, what the is the beta of this portfolio under the assumption that CAPM holds?

The expected return of a portfolio is 11%. If the rate of return on risk-free asset is 5% and you expect market return to be 14%, what the is the beta of this portfolio under the assumption that CAPM holds?

Expert Solution

The formula for Capital asset Pricing Model is

Exp return= Risk free rate+Beta*(Market return- Riskfree rate)

Beta=(Exp return-Risk free rate)/(Market return-Riskfree Rate)

= (11-5)/(14-5)

BETA=0.67

Beta is unitless.

jeff jeffy answered 2 years ago

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