Assume the CAPM Is the Correct Asset Pricing Model,and the Risk-Free

question 17

Multiple Choice

Assume the CAPM is the correct asset pricing model,and the risk-free rate of return is 6% and the market portfolio has an expected return and a standard deviation of 16% and 0.10%,respectively.An investor has a portfolio consisting of asset A,which has a beta of 1.6,and asset B,which has a beta of 0.6.If the investor wishes to earn a return identical to that of the market portfolio,what weight should the investor place in assets A and B?

• A) \( 33 \% \) in asset \( \mathrm{A} \) and \( 67 \% \) in asset \( \mathrm{B} \)
• B) \( 40 \% \) in asset \( A \) and \( 60 \% \) in asset \( B \)
• C) \( 50 \% \) in asset \( A \) and \( 50 \% \) in asset \( B \)
• D) \( 60 \% \) in asset A and \( 40 \% \) in asset \( B \)

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