Question

4. (15 pts) Suppose a financial market that have only three risky assets, stocks A, B and C, whose details are given in the following table. It is known that the expected return of the market portfolio is 20%. Assuming that this market satisfies the CAPM, and there exists a risk-free asset, answer the following questions. | | Number of outstanding shares | Price per share | Expected return | Standard deviation | Correlation with Stock A | Correlation with Stock B | Correlation with Stock C | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Stock A | 100 | $10 | | 15% | 1 | | | | Stock B | 100 | $5 | | 20% | 0 | 1 | | | Stock C | 50 | $10 | 20% | 20% | 0.5 | 0.5 | 1 | (a) (1 pts) Find the covariance matrix ?. (b) (4 pts) Find the standard deviation of the market portfolio. (c) (3 pts) Find the beta of stock C. (d) (3 pts) Find the return of the risk-free asset. (e) (4 pts) Find the expected return of stock B

          4. (15 pts) Suppose a financial market that have only three risky assets, stocks A, B and C, whose details are given in the following table. It is known that the expected return of the market portfolio is 20%. Assuming that this market satisfies the CAPM, and there exists a risk-free asset, answer the following questions.

| | Number of outstanding shares | Price per share | Expected return | Standard deviation | Correlation with Stock A | Correlation with Stock B | Correlation with Stock C |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Stock A | 100 | $10 | | 15% | 1 | | |
| Stock B | 100 | $5 | | 20% | 0 | 1 | |
| Stock C | 50 | $10 | 20% | 20% | 0.5 | 0.5 | 1 |

(a) (1 pts) Find the covariance matrix ?.
(b) (4 pts) Find the standard deviation of the market portfolio.
(c) (3 pts) Find the beta of stock C.
(d) (3 pts) Find the return of the risk-free asset.
(e) (4 pts) Find the expected return of stock B

4. (15 pts) Suppose a financial market that have only three risky assets, stocks A, B and C, whose details are given in the following table. It is known that the expected return of the market portfolio is 20%. Assuming that this market satisfies the CAPM, and there exists a risk-free asset, answer the following questions.

| | Number of outstanding shares | Price per share | Expected return | Standard deviation | Correlation with Stock A | Correlation with Stock B | Correlation with Stock C |
| :— | :— | :— | :— | :— | :— | :— | :— |
| Stock A | 100 | 10 | | 15% | 1 | | |
| Stock B | 100 |5 | | 20% | 0 | 1 | |
| Stock C | 50 | 10 | 20% | 20% | 0.5 | 0.5 | 1 |

(a) (1 pts) Find the covariance matrix ?.
(b) (4 pts) Find the standard deviation of the market portfolio.
(c) (3 pts) Find the beta of stock C.
(d) (3 pts) Find the return of the risk-free asset.
(e) (4 pts) Find the expected return of stock B

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