Negative expected return, Assume rf is 5% and rm is 10%.

Negative expected return

Assignment Help Basic Statistics

Reference no: EM1390743

Part 1) Assume rf is 5% and rm is 10%. According to the SML and CAPM, an asset with a beta of -2.0 has a required return of negative 5%[=5-2(10-5)]. Can this be possoble?

Part 2) Does this mean that the asset has negative risk? Why would anyone ever invest in an that has an expected and required return that is negative? Explain in detail.

Reference no: EM1390743

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