Question
A stock has a beta of 1.5, an expected return of 17.2 percent, and lies on the security market line. A risk-free asset is yielding
A stock has a beta of 1.5, an expected return of 17.2 percent, and lies on the security market line. A risk-free asset is yielding 3.2 percent. You want to create a portfolio that is comprised of the stock and the risk-free and will have a portfolio beta of 1.3. What is the expected return on this portfolio?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the expected return on the portfolio we can use the capital asset pricin...
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Step: 2
Step: 3
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
11th edition
324422870, 324422873, 978-0324302691
