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24. What is the average return of a portfolio that has 10% invested in stock A, 40% invested in stock B and 50% invested in stock C?
Year Return
Stock A Stock B Stock C
1 15% 12% 5%
2 25% 14% -6%
3 8% 9% 10%
4 16% 25% 1%
5 5% 3% 15%

9.92%
15.32%
13.80%
8.92%

23. According to the CAPM (capital asset pricing model), the security market line is a straight line. The intercept of this line should be equal to
zero
the expected risk premium on the market portfolio
the risk-free rate
the expected return on the market portfolio

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Solution Summary

The average return of a portfolio and CAPM are determined.

Solution provided by:
Sonia Agarwal, CA
Education
  • Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
  • Bachelor of Commerce, West Bengal University
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