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Find the Expected Rate of Return on the Market Portfolio given

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Find the Expected Rate of Return on the Market Portfolio given that the Expected Rate of Return on Asset "i" is 10%, the Risk-Free Rate is 3%, and the Beta (b) for Asset "i" is 1.5.

Find the Risk-Free Rate given that the Expected Rate of Return on Asset "j" is 14%, the Expected Return on the Market Portfolio is 12%, and the Beta (b) for Asset "j" is 1.5.

What do you think the Beta (ß) of your portfolio would be if you owned half of all the stocks traded on the major exchanges? Explain.

Hello. I have provided an answer to your question below:

If you owned half of all the stocks traded on the major exchanges, you would likely have a beta of 1.0. A portfolio with a beta of 1.0 has the same riskiness as the market. As you diversify your portfolio, the unique risk of your individual stocks becomes less important and the riskiness of your portfolio approaches the riskiness of the market. Typically, a well-diversified portfolio can be constructed with about 30 stocks. Here, you have significantly more stocks than 30, thus suggesting a well-diversified portfolio and with the same risk as the market.

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Find the Expected Rate of Return on the Market Portfolio given that the Expected Rate of Return on Asset "i" is 10%, the Risk-Free Rate is 3%, and the Beta (b) for Asset "i" is 1.5.

Find the Risk-Free Rate given that the Expected Rate of Return on Asset "j" is 14%, the Expected Return on the Market Portfolio is 12%, and the Beta (b) for Asset "j" is 1.5.