1.consider the one-factor apt. the standard deviation of return on a well-diversified portfolio is 20%. the standard deviation on the factor portfolio is 12%. the beta of the well-diversified portfolio is approximately

2.according to the capm, what is the expected market return given an expected return on a security of 15.8%, a stock beta of 1.2, and a risk-free interest rate of 5%?

The beta of the well-diversified portfolio is approximately is 1.67

Market rate of return is 14%

Explanation:

The computation of the beta is shown below:

= Standard deviation of return on a well-diversified portfolio ÷ standard deviation on the factor portfolio

= 20% ÷ 12%

= 1.67

In this question, we apply the Capital Asset Pricing Model (CAPM) formula which is shown below

Expected rate of return = Risk-free rate of return + Beta × (Market rate of return - Risk-free rate of return)

15.8% = 5% + 1.2 × (Market rate of return - 5%)

10.8% = 1.2 × (Market rate of return - 5%)

10.8% ÷ 1.2 =  (Market rate of return - 5%)

9% = Market rate of return - 5%

So, the market rate of return equals to

= 9% + 5%

= 14%

anjan should should report alteast 5000 on the first apyment and 10,000 each year

explanation: