Question: It's only one graph Keith holds a portfolio that is invested equally in three stocks (wD = wA = w-1/3). Each stock is described in

It's only one graph It's only one graph Keith holds a portfolio that is investedequally in three stocks (wD = wA = w-1/3). Each stock is

Keith holds a portfolio that is invested equally in three stocks (wD = wA = w-1/3). Each stock is described in the following table Stock Beta Standard Deviation Expected Return DET 0.7 AIL 1.0 INO 1.6 25% 38% 34% 8.0% 10.0% 13.5% An analyst has used market- and firm-specific information to make expected return estimates for each stock. The analyst's expected return estimates may or may not equal the stocks' required returns The risk-free rate [rRF] is 6%, and the market risk premium [RPm] is 4%. Use the following graph with the security market line (SML) to plot each stock's beta and expected return Tool tip: Mouse over the points on the graph to see their coordinates RATE OF RETURN (Percent 20 18 16 Stock DET Stock AIL 12 Stock INO 10-_

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