Reference no: EM132582165

You are given the expected returns and standard deviations of L'Oreal and Daimler AG, the Euro Stoxx 50 Index of largest Eurozone firms, and the risk free asset.

Asset                    Expected Return               Standard Deviation

L'Oreal                       16%                                30%

Daimler                      12%                                    25%

Euro Stoxx 50                 13%                                  12%

Risk Free Asset                   3%                                 0%

Assuming that the returns are explained by the capital asset pricing model;

Question a) calculate the betas of L'Oreal and Daimler.

Question b) calculate the risk of a portfolio holding L'Oreal and Daimler with an expected return the same as the Euro Stoxx 50 Index return.