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Abrams builds a portfolio by investing in two stocks only: Microsoft (MSFT) and Motorola (MSI). According to the CAPM, the expected risk premium (i.e., the
Abrams builds a portfolio by investing in two stocks only: Microsoft (MSFT) and Motorola (MSI). According to the CAPM, the expected risk premium (i.e., the expected return minus the risk-free rate) of MSFT is 10.22% and the expected risk premium of MSI is 6.57%. The beta of MSFT is equal to 1.26. If Abrams puts 61% of his money in MSFT stock and 39% in MSI stock, what is the approximate beta of his portfolio?
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