An investor uses the CAPM to estimate required returns. In today's environment, the risk-free rate is 3% and the market

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An Investor Uses The Capm To Estimate Required Returns In Today S Environment The Risk Free Rate Is 3 And The Market 1 (99.83 KiB) Viewed 61 times

An investor uses the CAPM to estimate required returns. In today's environment, the risk-free rate is 3% and the market risk premium (CM - TRF) is 5%. Stock Beta Standard Deviation A 1.30 20% B 1.10 25% с 1.00 10% D 0.85 10% E 0.60 30% Assume that the five stocks are all positively, but not perfectly, correlated with the market portfolio. If an investor constructs a portfolio that invests equal amounts in each of the five stocks, which of the following statements is most correct? AB 1. The portfolio's required return is 7.85%. 2. The portfolio's standard deviation is 19%. 3. The portfolio's beta is greater than 1.0. 4. if the market risk premium increased, the required return on all five stocks would go up by the same amount. 5. All the statements above are correct.