S.O.S. Mathematics CyberBoard

Efficient Portfolio 1:
E (R1) = 20%
SD1 = 10%

Efficient Portfolio 2:
E (R2) = 40%
SD2 = 30%

Market Portfolio:
E (Rm) = 25%

Security in a Market:
E(Rs) = 20%
SDs = 30%

Find CORREL of its return and market returns (holding all assumptions of CAPM).

How would you solve this problem? I thought using BETA = (CORREL*SD)/SD would be appropriate but I don't know what the beta value is. I also thought using E(R) = Rf + BETA(E(Rm) - Rf) would also work to find BETA, but I don't know the value of riskfree.

What is CORREL? the correlation?

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Rud Faden

yeah it's the correlation

The Capital Allocation Line is a straight line since the risk-free asset has no variance and therefore is not correlated with any other asset. So you do know the risk-free rate.

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"If I have not seen as far as others, it is because giants were standing on my shoulders." - Hal Abelson