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Free_Kalibri [48]
3 years ago
10

Suppose there are two independent economic factors, M1 and M2. The risk-free rate is 4%, and all stocks have independent firm-sp

ecific components with a standard deviation of 49%. Portfolios A and B are both well diversified. Portfolio Beta on M1 Beta on M2 Expected Return (%) A 1.6 2.4 39 B 2.3 -0.7 9
Mathematics
1 answer:
OLEGan [10]3 years ago
3 0

Answer:

<em> E(rP) = 4% + 5.50% x β(M1) + 10.92% x β(M2)</em>

Step-by-step explanation:

l<em>et us recall from the following statement:</em>

<em>The  two independent economic factors are M1 and M2</em>

<em>Th risk free rate = 4%</em>

<em> The standard deviation of all stocks of  independent firm specific components is =49%</em>

<em>P = portfolios for A and B</em>

<em>Now, </em>

<em>What is the expected relationship of return-beta </em>

<em>The Expected return-beta relationship E(rP) =  % +  βp₁ +  βp₂</em>

<em>E(rA) = 4% + 1.6 * M1 + 2.4* M2 = 39% </em>

<em> E(rB) = 4% + 2.3 * M1 + (-0.7)* M2 = 9% </em>

<em> Therefore </em>

<em>Solving for M1 and M2 using excel solver, we have M1 = 5.50% and M2 = 10.92% </em>

<em> E(rP) = 4% + 5.50% x β(M1) + 10.92% x β(M2)</em>

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ANSWER

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EXPLANATION

We have that David cast a shadow 42 inches long and he is 66 inches tall.

At that same place and time, Emma cast a shadow of 28 inches.

Since they are at the same spot and time, we can conclude that the ratio of their height to shadow must be the same.

Let Emma's height be x.

The ratio of David's shadow to height is:

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For Emma, it is:

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That means that:

\begin{gathered} \frac{42}{66}\text{ = }\frac{28}{x} \\ \text{Solve for x by cross-multiplying:} \\ 42\cdot\text{ x = 66 }\cdot\text{ 28} \\ x\text{ = }\frac{66\cdot\text{ 28}}{42} \\ x\text{ = 44 inches} \end{gathered}

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mihalych1998 [28]

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e-lub [12.9K]

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Step-by-step explanation:

                     ~ Distribute:

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                        ~ Flip the equation:

                  1 / 2 x + -3 / 2 = -11

                          ~ Use transposition method:

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                       1 / 2 x = -11 - (-3 / 2)

                                  = -19 / 2

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Hope this helped

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