A diagram of the CML and SML for the market
M
, riskfree asset
r_(f)
, an inefficient portfolio.
P
, and a complete portfolio
C
is shown below. The diagram is not to scale. The values of the labeled variables are
E[r_(1)]=3.9%
,
E[r_(2)]=10.5%,E[r_(3)]=19.7%,\sigma _(1)=14.5%,\sigma _(2)=22.9%
,
\sigma _(3)=33.6%
. What is the standard deviation of nonsystematic risk for the complete portfolio
\sigma _(\epsi lon,C)
under the CAPM? a. 0.0391 b. 0.0492 c. 0.1255 d. 0.1146 e. 0.0738 f. 0.0584 g. 0.0885 h. 0.0976

Question

A diagram of the CML and SML for the market

M

, riskfree asset

r_(f)

, an inefficient portfolio.

P

, and a complete portfolio

C

is shown below. The diagram is not to scale. The values of the labeled variables are

E[r_(1)]=3.9%

,

E[r_(2)]=10.5%,E[r_(3)]=19.7%,\sigma _(1)=14.5%,\sigma _(2)=22.9%

,

\sigma _(3)=33.6%

. What is the standard deviation of nonsystematic risk for the complete portfolio

\sigma _(\epsi lon,C)

under the CAPM? a. 0.0391 b. 0.0492 c. 0.1255 d. 0.1146 e. 0.0738 f. 0.0584 g. 0.0885 h. 0.0976

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