Using CAPM An equity has a beta of 1.35 and an expected return of 16 per cent.

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Using CAPM An equity has a beta of 1.35 and an expected return of 16 per cent. A risk-free asset currently earns 4.8 per cent.

(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 0.95, what are the portfolio weights?

(c) If a portfolio of the two assets has an expected return of 8 per cent, what is its beta?

(d) If a portfolio of the two assets has a beta of 2.70, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.

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Fundamentals Of Corporate Finance

ISBN: 9780077178239

3rd Edition

Authors: David Hillier, Iain Clacher, Stephen A. Ross

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Question Posted: Jul 19, 2024 05:00 PM

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Using CAPM An equity has a beta of 1.35 and an expected return of 16 per cent.

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Fundamentals Of Corporate Finance

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