Using CAPM A stock has a beta of 1.2 and an expected return of 16 percent. A

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Using CAPM A stock has a beta of 1.2 and an expected return of 16 percent. A risk-free asset currently earns 5 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 .75, what are the portfolio weights?

c. If a portfolio of the two assets has an expected return of 8 percent, what is its beta?

d. If a portfolio of the two assets has a beta of 2.40, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain. LO.1

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Corporate Finance

ISBN: 9780073105901

8th Edition

Authors: Jeffrey Jaffe, Bradford D Jordan

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Question Posted: Jul 31, 2024 11:01 AM

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Using CAPM A stock has a beta of 1.2 and an expected return of 16 percent. A

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Corporate Finance

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