You hold a portfolio of three stocks with the following investments and individual betas.
Stock A $12,000 investment has a beta of 1.75. Stock B $20,000 investment has a beta of 0.50. Stock C $12,000 investment has a beta of 1.25.

a) (4 points) What is the portfolio beta? Show all work.
b) (4 points) If the current risk-free rate of return is 3.0% and the return on an average risk security, r(m), is 7%, what is the required rate of return on the portfolio? Show all work.

Answer rating: 100% (QA)

a To calculate the portfolio beta we need to determine the weighted average beta of the individual s... View the full answer