Explanation of expected rate of return

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Reference no: EM1333230

A portfolio that combines the risk-free asset and the market portfolio has an expected return of 22 percent and a standard deviation of 5 percent. The risk-free rate is 4.9 percent, and the expected return on the market portfolio is 19 percent. Assume the capital-asset-pricing model holds.

Question: What expected rate of return would a security earn if it had a 0.6 correlation with the market portfolio and a standard deviation of 3 percent?

Reference no: EM1333230

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