What do you think the risk–free rate is ought to be

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Suppose that the market portfolio is equally likely to increase by 24% or decrease by 8%. Security A goes up on average by 29% when the market goes up and goes down by 11% when the market goes down. Security B goes down on average by 16% when the market goes up and goes up by 16% when the market goes down. Security C goes up on average by 4% when the market goes up and goes up by 4% when the market goes down

a) What do you think the “risk–free” rate is ought to be?

b) What to you think the expected return on market portfolio ought to be?

c) What is the expected return on security B?

d) What is the expected return on security with a beta of 0?

Please show all work

Reference no: EM131886631

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