Lancelot Fund: Expected Market Return and standard deviation

Lancelot Fund Management has found the Holy Grail; a mean-variant efficient portfolio of stocks with an expected return of 25% p.a., a beta of 1.5 and a standard deviation of expected returns of 20% p.a. If the risk free rate is 7% p.a., deduce the expected market return and standard deviation.

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... p.a. If the risk free rate is 7% p.a., deduce the expected market return and standard deviation.

Find the Expected Market Return, RM

RP = RF + (RM - RF) x P

25 = 7 + (RM - 7) x 1.5

RM = 19 (ANS)

Find Standard ...