Part A Woolworths Ltd has a beta of 0.90. If the market risk premium...
90.2K
Verified Solution
Link Copied!
Question
Accounting
Part A
Woolworths Ltd has a beta of 0.90. If the market risk premium is 6% and the risk-free rate is 3%, what is the expected return for CSL Ltd according to CAPM?
Part B
Can a portfolio standard deviation be less than the standard deviation of every asset in the portfolio? If yes, please give an example.
Part C
There are two stocks in your portfolio. Stock Weight E(r) Standard Variance A 50% 10% 6% B 50% 20% 12%
a) Assume stock A and B have a correlation of 0.5, calculate the risk and return for your portfolio.
b) Repeat (a), assume the correlation is -0.5. Why is the risk now lower in (b) than in (a)?
c) Will you invest in Stock A alone if the correlation between A and B is -0.5?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
