During the same year, the risk-free rate was 5% and the return on the m portfolio was 12%. (1) What is the actual return earned by your portfolio? (ii) What is the beta of your portfolio? (2 (iii) Using the beta calculated in (I1) above, calculate tte required return or your portfolio

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A:

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A: Formulas:

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A: AAR=sum of returntotal number of return

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.