You are considering creating a diversified portfolio consisting of the following 5 shares. Share A B C D E Beta 1.33 0.70 1.50 0.66 1.20 If currently the risk-free rate equals 5% and the return on the market portfolio is 11%, calculate the return of each share according to Capital Asset Pricing Model (CAPM). If you want to invest $1,500

You are considering creating a diversified portfolio consisting of the following 5 shares.

Share	A	B	C	D	E
Beta	1.33	0.70	1.50	0.66	1.20

 

1. If currently the risk-free rate equals 5% and the return on the market portfolio is 11%, calculate the return of each share according to Capital Asset Pricing Model (CAPM).
2. If you want to invest $1,500 in Share A, $3,000 in Share B, $6,000 in Share C, $1,500 in Share D and $3,000 in Share E, Calculate the weights of each share in the portfolio.
3. Calculate the return of the portfolio. 
4. Calculate the portfolio beta. 

Expert Answer

According to the Capital Asset Pricing Model (CAPM), the expected return of a stock can be calculated using the following formula: Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate) Using the given beta values and market and risk-free rates, we can calculate View the full answer