For the problem found below, answer the following questions:
1. What financial concept or principle is the problem asking to solve?
2. In the context of the problem scenario, what are some business
decisions that a manager would be able to make after solving the
problem?
3. Is there any additional information missing from the problem that
would enhance the decision-making problem?
4. Without showing mathematical calculations, explain in writing how
you would solve the problem.

A portfolio that combines the risk-free asset and the market portfolio
has an expected return of 22% and a standard deviation of 5%.  The
risk-free rate is 4.9%, and the expected return on the market
portfolio is 19%.  Assume the CAPM holds.  What expected rate of
return would a security earn if it had a 0.6 correlation with the
market portfolio and a standard deviation of 3%?

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Clarification of Question by lrdgz-ga on 18 Sep 2005 14:43 PDT

I would appreciate all you can do to expedite your response to me -
preferably within the next couple of hours.  I will make it worth your
while in a tip!  Thanks in advance.