Assume both portfolios A and B are well diversified, that E ( r A ) = 13.2% and

Question

Assume both portfolios A and B are well diversified, that E(rA) = 13.2% and E(rB) = 14.3%. If the economy has only one risk factor, and A = 1 while B = 1.2, what must be the risk-free rate? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal places.)

Assume both portfolios A and B are well diversified, that E(rA) = 13.2% and E(rB) = 14.3%. If the economy has only one risk factor, and A = 1 while B = 1.2, what must be the risk-free rate? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal places.)

Explanation / Answer

7.70%

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