Question
A portfolio P is composed of two risky stocks A and B whose expected returns are 12% and 20%, respectively. The expected return of P
A portfolio P is composed of two risky stocks A and B whose expected returns are 12% and 20%, respectively. The expected return of P is 16%. The betas of P and A are 1.5 and 1.2, respectively. The expected return of the market portfolio is 10%. Finally, stock As return is thought overestimated by 1%.
a. What is the beta of B?
b. What is the alpha of B?
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ISE Analysis For Financial Management
Authors: Robert C. Higgins Professor, Jennifer Koski
13th International Edition
1265042632, 9781265042639
