Look back at Table 7 5 shown below a What is the beta of a portfolio that has 40 invested in Ford and 60 in Pfizer b Would you invest in this portfolio if you had no superior information about the prospects for these stocks Devise an alternative portfolio with the same expected return and less risk c Now repeat parts (a) and (b) with a portfolio that has 40 invested in Starbucks and 60 in Walmart Table 7 5 Stock Dow Chemical Bank of America Ford Exxon Mobil Starbucks Beta (B) Stock 1 78 1 54 1 53 98 95 IBM Newmont Pfizer Walmart Heinz Beta (B) 80 75 66 42 40

Question: Look back at Table 7.5 shown below. a. What is the beta of a portfolio that has 40% invested in Ford and 60% in Pfizer?

Look back at Table 7.5 shown below.
a. What is the beta of a that has 40% invested in Ford and 60% in Pfizer?
b. Would you invest in this if you had no superior information about the prospects for these stocks? Devise an alternative with the same and less risk.
c. Now repeat parts (a) and (b) with a that has 40% invested in Starbucks and 60% in Walmart.
Table 7.5

Stock Dow Chemical Bank of America Ford Exxon Mobil Starbucks Beta (B) Stock 1.78 1.54 1.53 98 .95 IBM Newmont Pfizer Walmart Heinz Beta (B) .80 .75 .66 .42 40

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a The beta of the portfolio with 40 invested in Ford and 60 invested in Pfizer is 1008 040 x 153 060 ... View full answer

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