Question: Exercise #5 (9 points) E (R) 15.5% 5% SML 1.5 | (a) What is the Expected Return for a security with a Beta of

Exercise #5 (9 points) E (R) 15.5% 5% SML 1.5 | (a)

Exercise #5 (9 points) E (R) 15.5% 5% SML 1.5 | (a) What is the Expected Return for a security with a Beta of 1.2? (b) If a mutual fund manager also has a portfolio with a Beta of 1.2, and expects his portfolio to earn a rate of return of 10 percent, is it a good idea to invest? Why? C) If you had a stock with a Beta of 1.5 and it paid you a $2 in dividends, and you expected the price to be $100 in a year, what would you pay for the stock today?

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