Suppose the standard deviation of the market return is 14% a. What is the standa

Question

Suppose the standard deviation of the market return is 14% a. What is the standard deviation of returns on a well-diversified portfolio with a beta of 1.1? (Enter your answer as a percent rounded to the nearest whole number.) Standard deviation b. What is the standard deviation of returns on a well-diversified portfolio with a beta of 0? (Enter your answer as a percent rounded to the nearest whole number.) Standard deviation C. A well-diversified portfolio has a standard deviation of 7%. What is its beta? (Round your answer to 2 decimal places.) Beta

Explanation / Answer

hi..

Here standard deviation of market portfolio = 14%

a) for part a beta =1.1

so standard deviation of well diversified portfolio = beta * stand. dev. of market = 1.1*14% = 15.4%

b) for part b stand dev. of well diversified portffolio = 14%*0 = 0

c) for part c beta = std. dev. of well diversified portfolio//std. dev. of market = 7%/14% = 0.5

Thanks

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