(Solution) - Suppose the equilibrium Sharpe ratio required for a well diversified portfolio -(2025 Original AI-Free Solution)

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Suppose the equilibrium Sharpe ratio required for a well-diversified portfolio is 0.25. the world market portfolio has a volatility of 19 percent, and the emerging markets have a volatility of 32 percent and a correlation of 0.45 with the world market portfolio. What would be the risk premium on the world market portfolio? What should be the emerging Sharpe ratio, risk premium, and beta?