- For each of the scenarios below, explain whether or not it

represents a diversifiable or an undiversifiable risk. Please consider

the issues from the viewpoint of investors. Explain your reasoning.
- There’s a substantial unexpected increase in inflation.
- There’s a major recession in the U.S.
- A major lawsuit is filed against one large publicly traded corporation.

- Use the CAPM to answer the following questions:
- Find the Expected Rate of Return on the Market Portfolio given that

the Expected Rate of Return on Asset “i” is 12%, the Risk-Free Rate is

4%, and the Beta (b) for Asset “i” is 1.2.
- Find the Risk-Free Rate given that the Expected Rate of Return on

Asset “j” is 9%, the Expected Return on the Market Portfolio is 10%, and

the Beta (b) for Asset “j” is 0.8.
- What do you think the Beta (β) of your portfolio would be if you

owned half of all the stocks traded on the major exchanges? Explain.

- In one page explain what you think is the main ‘message’ of the

Capital Asset Pricing Model to corporations and what is the main message

of the CAPM to investors?

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Liz2022-08-01 18:18:192022-08-01 18:18:19The Capital Asset Pricing Model, business and finance homework help