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Business, 28.11.2019 19:31 gkasshy334

Suppose that the s& p 500, with a beta of 1.0, has an expected return of 13% and t-bills provide a risk-free return of 4%.

a). what would be the expected return and beta of portfolios constructed from these two assets with weights in the s& p 500 of (i) 0; (ii) .25; (iii) .5; (iv) .75; (v) 1.0?
b). on the basis of your answer to (a), what is the trade-off between risk and return, that is, how does expected return vary with beta?
c). what does your answer to (b) have to do with the security market line relationship?

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