Prob. of state S&P 500 Technology T-Bills -15% State International Fund + 1% GDP .25 8% 5% 30% + 2% GDP .50 12% 15% 15% + 3% GDP .25 16% 45% 5% 0% 5, If you fiqune the Betas Of technologu international finds to be What wald the reauired return OF an equally- weighted portkolio of technology T-billsand Intrnational Funds?amDema.cepecD 0 @todmecmanodoosmebO00ne l.6 and d 8, respectively

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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100%
Prob. of state S&P 500
Technology T-Bills
-15%
State
International Fund
+ 1% GDP
.25
8%
5%
30%
+ 2% GDP
.50
12%
15%
15%
+ 3% GDP
.25
16%
45%
5%
0%
Transcribed Image Text:Prob. of state S&P 500 Technology T-Bills -15% State International Fund + 1% GDP .25 8% 5% 30% + 2% GDP .50 12% 15% 15% + 3% GDP .25 16% 45% 5% 0%
5, If you fiqune the Betas Of technologu
international finds to be
What wald the reauired return OF an equally-
weighted portkolio of technology T-billsand
Intrnational Funds?amDema.cepecD 0
@todmecmanodoosmebO00ne
l.6 and
d 8, respectively
Transcribed Image Text:5, If you fiqune the Betas Of technologu international finds to be What wald the reauired return OF an equally- weighted portkolio of technology T-billsand Intrnational Funds?amDema.cepecD 0 @todmecmanodoosmebO00ne l.6 and d 8, respectively
Expert Solution
Introduction

Expected return of the market could be computed by multiplying the returns under different economic scenarios with the respective probabilities and then adding them.

Expected return of a particular fund can be computed by using capital asset pricing model (CAPM):

Finance homework question answer, step 1, image 1

Here,

Expected return is “ER”

Risk free rate is “Rf”

Beta is “β”

Market return is “RM”

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