Referring to Problem 5.30, assume that you believe that each of the five assets will earn the return shown in the table below. Based on these figures and the weights in Problem 5.29, what returns do you believe that Portfolios A and B will earn. Which portfolio would you invest in and why?

Asset _______Returns

1 .................. 16.5%

2 .................. 12.0%

3 .................. 15.0%

4 .................. 13.0%

5 .................... 7.0%

Data from Problem 5.30

Referring to Problem 5.29, if the risk-free rate is 2% and the market return is 7%, calculate the required return for each portfolio using the CAPM.

Data from Problem 5.29

Jeanne Lewis is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. She is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data.

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Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1.3 0.7 1.25 1.1 0.9 10% 30% 10% 10% 40% 100% 30% 1096 20% 20% 20% 100% 4 Total