5. Imagine there are two risky assets and the risk-free asset of the US bond in the table below. Suppose all the assumptions of the Capital Asset Pricing Model (CAPM) are satisfied. Then answer the...

What is the answer for M19?

Extracted text: 5. Imagine there are two risky assets and the risk-free asset of the US bond in the table below. Suppose all the assumptions of the Capital Asset Pricing Model (CAPM) are satisfied. Then answer the following questions. Shares Relative Shares Rate of Standard Deviation Security Outstanding In market Price returns Jazz Inc. 10,000 1/6 $4.50 12% 6% Classical, Inc. 20,000 1/3 $6.75 8% 2% [8] US bonds 30,000 1/2 $2.40 6% Total 60,000 1 [D2]: Explain the assumptions of the CAPM in three lines. [M14]: Answer the capitalization weight of Juzz Inc. in the market. ь. 14 c. 1/3 1/6 d. 2/5 e. 3/5 a. |M15): Answer the expected rate of return of the above market portfolio. d. 11% 8% b. 9% 10% c. 12% a. с. 3. ĮM16): Answer the volatility of the market portfolio when the covariance of the stocks between Jazz Inc. & Classical Inc. is 0.002. a. 1.5% c. 3.5% c. 5.5% b. 2.5% d. 4.5% (M17]: When you invest $1000 only into the risky assets based on CAPM. Then how much you invest into Jazz Inc. a. S100 c. About $333 c. $800 b. $250 d. $600 [M18]: If you invest $200 into the US bond following CAPM, how much you invest into the stock of the Jazz Inc? a. so b. S200 c. $400 e. $800 d. $600 [D3]: Answer the equation of the Capital market line. [M19|: When the covariance between the market portfolio and the stock of classical Inc. is 0.002, what is the approximate beta value of the stock classic Inc.? a. 0.057 b. 0.085 c. 1.000 d. 1.235 e. 1.632