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In: Finance

According to your personal analysis, the expected return of NFLX should be 8.2%. However, this is...

According to your personal analysis, the expected return of NFLX should be 8.2%. However, this is not necessarily what the CAPM is saying. The expected return on the market is 11.8%, the risk-free rate is 1.4%, and the beta for NFLX is 1.14.

You want to exploit the mispricing using an arbitrage portfolio and the recipe from the book. Give the weight in the risk-free asset in percentage.

{Give your answer as a percentage with 2 decimals, e.g., if the answer is 0.345224 (or 34.5224%) , enter 34.52 as your answer.}

Solutions

Expert Solution

Give the weight in the risk-free asset in percentage.
=1-beta
=1-1.14
=-0.1400
=-14.00%
=-14.00

jeff jeffy answered 2 years ago
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