Calculate the expected return and standard deviation

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1) Assume both portfolios A and B are well diversified, that E (RA) = 14% and E (RB) = 14.8%. If the economy has only one factor, and ??A = 1 while βB = 1.1, what must be the risk-free rate?

2) Assume that the risk-free rate, Rf = 5%; the expected rate of return on the market, E(Rm)= 11%; and that the standard deviation of returns on the market portfolio is σM =20%. Calculate the expected return and standard deviation of returns for portfolios that are 25%, 75%, and 125% invested in the market portfolio.

Reference no: EM132700933

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