I dont get the parts, may you explain all parts, thanks ...
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I dont get the parts, may you explain all parts, thanks
A portfolio is constructed from 4 shares as follows: Weight 0.40 0.30 0.20 0.10 Share A B C D B 1.40 1.20 0.95 1.05 Specific Risk 25% 30% 20% 15% The risk-free interest rate is 5% p.a., the market offers an expected return 3% p.a. above the risk free rate, and the standard deviation of the market return is 20%. (a) (b) (C) Calculate the of the portfolio; Calculate the expected return on the portfolio using the CAPM; What percentage of the portfolio variance is due to the specific risk? The table below gives the returns of the market and a stock under possible states of the market. Calculate the stocks beta, which is the covariance between the stock and the market returns, divided by the variance of market returns. 18 State Very bad Bad Ok Good Probability Market's return Stock's return 0.1 -10% -20% 0.2 -2% -10% 0.4 0% 1% 0.2 5% 12% Very good 0.1 12% 25%
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