18. A stock has a beta of the stock is 1.1. The risk free rate is 2.5% and the return on the market is 12%. You predict (expect) the return for the stock will be 14%. According to the CAPM (i.e. the Security Market Line) you should Sell because required return is 9.95% Sell because required return is 16.5%. Buy because required retum is 11.5% d. Buy because required retum is 12.95%. a. b. c. 23 Jay has a 2-stock portfolio with a total value of $100,000. $50,000 is invested in Stock A with a beta of 0.5 and the remainder is invested in Stock B with a beta of 1.5. What is his portfolio's beta? a 0 b. 0.5 c. 1.0 d. 1.5 2.0 e. 25. in a market a An investor owning a stock with a beta of (-2) would expect the stock's return to that was expected to decline 10 percent. Rise by 20.0% b. Fall by 20.0% Rise by 10.2% d. Fall by 10.2% C. 28. Consider the CAPM. The required return on the market (rm) is 18%. The required return on a stock with a beta of 1.2 is 20%. What is the risk-free rate? a. 2% b. 6% c. 8% d. 12% 29. Jill Angel holds a $200,000 portfolio consisting of the following stocks. The portfolio's beta is 0.88 Stock B D Total Investment $50,000 $50,000 $50,000 $50,000 $200,000 Beta 0.50 0.80 1.00 1.20 If Jill replaces Stock A with another stock, E, which has a beta of 1.45, what will the portfolio's new beta be? a. 1.39 b. 1.28 c. 0.83 d. 1.22 e. 1.11