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Business, 01.06.2021 19:00 zoewilliamss26

Suppose that 16 risky assets have been identified whose rates of return satisfy ri=±α+f+ϵi where α>0. Note that 8 of the risky assets use the + sign in front of α in the equation, while the other 8 use the − sign. The factor f is common to all 16 risky assets. The factor f has a mean of 10 and standard deviation equal to 3–√. Each ϵi represents a specific error, in the sense that each has zero mean, zero covariance with f, and zero covariance with the other risky assets. Each ϵi has a standard deviation equal to 4. Now assume that a portfolio consists of all of these stocks, with equal weight given to each one of them. What is the expected rate of return of the portfolio?

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Suppose that 16 risky assets have been identified whose rates of return satisfy ri=±α+f+ϵi where α&g...
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