1. The expected return on the market portfolio is 9%. The risk free rate is 5%. The variance of the market portfolio returns is 0.08 and the covariance of the market and GE returns is 0.06.

 

a. Calculate beta for GE. Interpret what beta means. 

 

 

b. Calculate the expected return for GE stock, how is it compared to the expected return on the market portfolio? 

 

 

c. If you form a portfolio with 75% invested in the market portfolio and 25% invested in the GE stock, what would be the expected return for the portfolio? 

 

Answer rating: 100% (QA)

a To calculate the beta for GE we need to use the covariance between the market and GE returns and t... View the full answer