Question: Please respond with formulas, and also I know this answer is given in the website, I dont think that is correct as the weights are
Please respond with formulas, and also I know this answer is given in the website, I dont think that is correct as the weights are too big
Thank you
Using CAPM. A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent.
a) What is the expected return on a portfolio that is equally invested in the two assets?
b) If a portfolio of the two assets has a beta of .7; what are the portfolio weights?
c) If a portfolio of the two assets has an expected return of 9 percent, what is its beta?
d) If a portfolio of the two assets has a beta of 2.3, what the portfolio weights? How do you interpret the weights for the two assets in this case? Explain
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