You invest $5,000 in Stock X, $2,000 in Stock Y, and $3,000 in Stock Z. a) If
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Question:
You invest $5,000 in Stock X, $2,000 in Stock Y, and $3,000 in Stock Z.
a) If the expected returns on Stocks X, Y, and Z are 15%, 10%, and 12%, respectively, what is the expected return on the portfolio?
b) If the betas for Stocks X, Y, and Z are 0.75, 1.20, and 1.60, respectively, what is the portfolio beta? If therisk free rate of return is 5 percent and the return on the market portfolio is 11 percent, what is the expected return on the portfolio according to the Capital Asset Pricing Model (CAPM)?
Related Book For
Fundamentals of corporate finance
ISBN: 978-0073382395
9th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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