Assume that CAPM holds, i.e. ri = r0 + i(rm-r0), where i = im/m2. The goal is
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Assume that CAPM holds, i.e. ri = r0 + βi(rm-r0), where βi = σim/σm2. The goal is to create a portfolio of stocks X, Y, and the risk-free asset. The beta of the portfolio is βP = 0.70. X has a beta of 1.5 and Y has a beta of 2.0. Expected return of Y is 10% more than the expected return of X. Risk-free rate is 5%. What is the expected return of this portfolio?
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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Related Book For 
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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