Question: Problem 2 (4 marks) You observe that the risk free rate of return is 2.5 percent and the market risk premium is 9 percent. You

Problem 2 (4 marks) You observe that the risk free rate

Problem 2 (4 marks) You observe that the risk free rate of return is 2.5 percent and the market risk premium is 9 percent. You have $5,000 invested in stock A and $15,000 invested in stock B. You have calculated that the beta of stock A is 1.25 and the beta of stock B is 1.50. Calculate the expected return for your portfolio

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