Analyst assessment of betas

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According to your favorite security analyst (who is very good at estimating betas, expected returns, and standard deviations):

βABC,M = 0.3, σ[RABC] = 8%, E[RABC ] = 10%, Rf = 8%, E[RM] = 16%, σ[RM] = 20%.

The riskless asset is T-bills. Rob is a risk averse investor who only cares about the expected return on his portfolio and the standard deviation of his portfolio return. Rob accepts the analyst's assessment of betas, expected returns, and standard deviations. Rob can form a portfolio with either T-bills and the market portfolio or T-bills and ABC. Which does Rob prefer?

-A. T-bills and the market portfolio.
-B. T-bills and ABC.
-C. Rob is indifferent.
-D. It depends how risk averse Rob is.
-E. Rob does not have enough information to decide.

Reference no: EM132953527

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