Stock A beta = 1,25 and Stock B beta = 0.75. CAPM applies. Expected Return on market

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Stock A beta = 1,25 and Stock B beta = 0.75.

CAPM applies. Expected Return on market portfolio = 10% and Risk free rate of return = 3%

1. What is the expected return of the portfolio consisting of 35% Stock A and 65% Stock B?

2. If non systematic risk of Stock A = 25% and Stock B = 28% and the standard deviation of market portfolio = 20%, what is the variance of the portfolios?

3. What are the average return and variance of the portfolio if they are financed by 20% borrowing?

Related Book For answer-question

Intermediate Financial Management

ISBN: 978-1111530266

11th edition

Authors: Eugene F. Brigham, Phillip R. Daves

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Posted Date: Feb 11, 2024 11:13 PM

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Stock A beta = 1,25 and Stock B beta = 0.75. CAPM applies. Expected Return on market

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Intermediate Financial Management

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