Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A stock has an expected return of 0.16, its beta is 0.63, and the expected return on the market is 0.1. What must the risk-free

A stock has an expected return of 0.16, its beta is 0.63, and the expected return on the market is 0.1. What must the risk-free rate be?

You own a portfolio equally invested in a risk-free asset and two stocks (If one of the stocks has a beta of 0.66 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To find the riskfree rate rf we can use the Capital Asset Pricing Model CAPM formula ERi Rf betaiERm ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial management theory and practice

Authors: Eugene F. Brigham and Michael C. Ehrhardt

13th edition

1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099

More Books

Students also viewed these Finance questions