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An investor with $1,000,000 forms an investment portfolio. He invests $200,000 in Stock Q, $300,000 in Stock R, $150,000 in the risk-free security, and the
An investor with $1,000,000 forms an investment portfolio. He invests $200,000 in Stock Q, $300,000 in Stock R, $150,000 in the risk-free security, and the remaining wealth in the market portfolio. The beta for stock Q is 1.5, and the beta for the investment portfolio is 0.87. The return on the risk-free rate is 2.1%, and the market portfolios expected return is 9.6%.
1A. What is the expected return for stock Q and stock R?
1B. What is the expected return for the portfolio?
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