Efficient Portfolio 1:
E (R1) = 20%
SD1 = 10%
Efficient Portfolio 2:
E (R2) = 40%
SD2 = 30%
E (Rm) = 25%
Security in a Market:
E(Rs) = 20%
SDs = 30%
Find CORREL of its return and market returns (holding all assumptions of CAPM).
How would you solve this problem? I thought using BETA = (CORREL*SD)/SD would be appropriate but I don't know what the beta value is. I also thought using E(R) = Rf + BETA(E(Rm) - Rf) would also work to find BETA, but I don't know the value of riskfree.
finding the correlation of the security's return and the market returns
portfolio weights are not given
I think I would be able to find the correlation if I knew the market's SD.
I'm suppose to use the CML equation, but I don't really see how that is helpful to find correlation...unless I also use SML also...and I still don't know how to plug in the numbers into these equations