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An investor is forming a portfolio by investing $40,000 in stock A which has a beta of 1.50, and $60,000 in stock B which has
An investor is forming a portfolio by investing $40,000 in stock A which has a beta of 1.50, and $60,000 in stock B which has a beta of 1.00. The return on the market is equal to 10 percent and Treasury bills have a yield of 4 percent. According to the CAPM, what is the required rate of return on the investor's portfolio? 1) 6.6% 2) 8.5% 3) 9.5% 4) 10.8% 5) 11.2%
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