Would you invest in this portfolio

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Reference no: EM132012734

Suppose you are a head of a hedge fund and are thinking to create a portfolio investing just in these three stocks. The portfolio weights, volatility and correlation with the market portfolio of the three stocks are given in the table below:

	Portfolio Weight	Volatility	Correlation with the Market Portfolio
Yahoo	0.25	12%	0.4
Microsoft	0.35	25%	0.6
Google	0.4	13%	0.5

1. If you expect to receive a rate of return of 9% on this portfolio, would you invest in this portfolio? Explain. Show Your work

2. Assume the CAPM correctly prices risk, is the market portfolio efficient? Explain why.

Reference no: EM132012734

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