Security a Has an Expected Return of 12

question 11

Essay

Security A has an expected return of 12.4% with a standard deviation of 15%,and a correlation with the market of 0.85.Security B has an expected return of -0.73% with a standard deviation of 20%,and a correlation with the market of -0.67.The standard deviation of r_M is 12%.
A) To someone who acts in accordance with the CAPM, which security is more risky, A or B? Why? (Hint: No calculations are necessary to answer this question; it is easy.)
B) What are the beta coefficients of A and B? Calculations are necessary.
C) If the risk-free rate is 6%, what is the value of r_M?

• A) To someone who acts in accordance with the CAPM, which security is more risky, A or B? Why? (Hint: No calculations are necessary to answer this question; it is easy.)
• B) What are the beta coefficients of A and B? Calculations are necessary.
• C) If the risk-free rate is 6%, what is the value of r_M?

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Definitions:

Stigmatizing Attribute

A stigmatizing attribute is a characteristic of an individual that is perceived negatively by society, leading to potential discrimination or social exclusion.

Vigilant

The act of being alert and watchful, especially for danger or opportunities.

Self-objectification

The practice of viewing oneself primarily as an object to be looked at and judged based on physical appearance.

Cultural Scrutiny

The examination and critical analysis of the norms, values, and practices of a culture, identifying how they shape individual behaviors and societal structures.