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.© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/accounting/lancelot-fund-expected-market-return-and-standard-deviation-33l
... 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 ...