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2. Suppose there are three risky assets with the following betas and ??j². Suppose j | ?j | ??j² 1 | 0.9 | 0.010 2 | 1.1 | 0.015 3 | 0.6 | 0.011 also that the variance of RMt – ?ft is 0.014. (a) What is the beta of an equally weighted portfolio of these three assets? (b) What is the variance of the excess return on the equally weighted portfolio? (c) What proportion of the total risk of asset 1 is due to market risk?

          2. Suppose there are three risky assets with the following betas and ??j². Suppose
j | ?j | ??j²
1 | 0.9 | 0.010
2 | 1.1 | 0.015
3 | 0.6 | 0.011
also that the variance of RMt – ?ft is 0.014.
(a) What is the beta of an equally weighted portfolio of these three assets?
(b) What is the variance of the excess return on the equally weighted portfolio?
(c) What proportion of the total risk of asset 1 is due to market risk?

2. Suppose there are three risky assets with the following betas and ??j². Suppose
j | ?j | ??j²
1 | 0.9 | 0.010
2 | 1.1 | 0.015
3 | 0.6 | 0.011
also that the variance of RMt – ?ft is 0.014.
(a) What is the beta of an equally weighted portfolio of these three assets?
(b) What is the variance of the excess return on the equally weighted portfolio?
(c) What proportion of the total risk of asset 1 is due to market risk?

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Elementary Statistics a Step by Step Approach

Allan G. Bluman 9th Edition

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04/11/2023

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Suppose there are three risky assets with the following betas and σεj². Suppose β1 = 0.9, β2 = 1.1, β3 = 0.6. Also, suppose that the variance of RMt - μft is 0.014. (a) What is the beta of an equally weighted portfolio of these three assets? (b) What is the variance of the excess return of the equally weighted portfolio? (c) What proportion of the total risk of asset 1 is due to market risk?