A

B

Suppose that the risk-free rate is 4% and the expected return on the market portfolio is 8%. A certain stock has a beta of 1.0. You believe that over the next year this stock will produce a return of 11%. Would you say that the stock is overpriced or underpriced? According to CAPM, the return that the stock should earn is % (Enter as a percentage and round to one decimal place.) Jason Jackson is attempting to evaluate 2 possible portfolios consisting of the same 5 assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data: a. Calculate the betas for portfolios A and B. b. If the risk-free rate is 2.3% and the market return is 5.9%, calculate the required return for each portfolio using the CAPM. c. Then assume you believe that each of the five assets will eam the return() shown in this table: Based on these figures and the weights, what returns do you beleve that Portfolios A and B will ear? Which portfore you would invest in and why? Data Table - 6 Data Table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1 1.29 18% 34% 2 0.68 26% 13% 3 125 7% 16% 4 1.12 13% 16% 5 0.95 36% 21% Total 100% 100% Asset 1 2 3 4 5 Returns 65% 6.0% 7.0% 6.5% 5,5% Print Done Print Done rrent Check