A stock has a beta of 1.13 and an expected return of 11.8 percent. A risk-free asset

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A stock has a beta of 1.13 and an expected return of 11.8 percent. A risk-free asset currently earns 2.6 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 .5, what are the portfolio weights?

c. If a portfolio of the two assets has an expected return of 10 percent, what is its beta?

d. If a portfolio of the two assets has a beta of 2.26, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.

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Corporate Finance Core Principles And Applications

ISBN: 9781260571127

6th Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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Question Posted: Nov 13, 2020 05:04 AM

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A stock has a beta of 1.13 and an expected return of 11.8 percent. A risk-free asset

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a We have a special case where the portfolio is equally weighted so we can sum the returns of each a...View the full answer

Corporate Finance Core Principles And Applications

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