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Market Returns using standard deviation and beta

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Suppose the standard deviation of the market return is 20%

A) What is the standard deviation of returns on a well-diversified portfolio with a beta of 1.3?
B) What is the standard deviation of returns on a well-diversified portfolio with a beta of 0?
C) A well-diversified portfolio has a standard deviation of 15%. What is its beta?
D) A poorly diversified portfolio has a standard deviation of 20%. What can you say about its beta?

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Solution Summary

The solution determines the market returns using standard deviation and beta.

Solution Preview

a.
covariance = r * sigma m * sigma p

where
r = coefficient of correlation between returns of market and portfolio
sigma = standard deviation of returns for market and ...

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