What are the betas of the two securities?
Not what you're looking for?
1. You are given the following information on two securities, the market portfolio, and the risk free rate:
(See attached file for full problem description with chart)
For parts a, b, and c, use the above Table.
a. Draw the Security Market Line.
b. What are the betas of the two securities?
c. Plot the two securities on the Security Market Line.
d. Now assume that the two securities 1 and 2 constitute the market portfolio. Their proportion in it and variances are 0.39, 160, and 0.61, 340 respectively. The covariance of the two securities is 190. Calculate the betas of the two securities.
e. Why should the expected return for a security be directly related to the security's covariance with the market portfolio?
Purchase this Solution
Solution Summary
Assess the market portfolio and the risk free rate.
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.