Answered: If the variance of the portfolio is…

If the variance of the portfolio is 324, Coefficient of determination of the portfolio with market is 0.81, then the systematic risk of the portfolio is a. 324.24 b. 810.64 c. 256.24 d. 262.44

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 7MC: Explain correlation to your client. Calculate the estimated correlation between Blandy and...

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Concept explainers

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.

Question

If the variance of the portfolio is 324, Coefficient of determination of the portfolio with market is 0.81, then the systematic risk of the portfolio is

324.24

810.64

256.24

262.44

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