Market portfolio expected return

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1) Based on CAPM, which risk matters for a risky portfolio's expected return, total risk, systematic risk or firm-specific risk?

2) IBM's stock's beta is 1.5, T-bill rate is 1% and the market portfolio's expected return is 5%. What is IBM's expected return? (Show steps)

3) Which risk can be diversified away, firm specific risk or systematic risk?

4) A mutual fund's expected return and beta are 6% and 1.2, respectively. The market portfolio's expected return is 6% and T-bill rate is 1%. Should I invest in this fund? (Show why)

5) If you expect a bull market for next month, should you buy high beta or low beta stocks now for a high expected return next month? Why?

Reference no: EM131710185

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