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Assume we have two stocks, A and B. Stock A has expected return 16% and stock B has expected return 12%. The beta for stock

Assume we have two stocks, A and B. Stock A has expected return 16% and stock B has expected return 12%. The beta for stock A is 1.5 and the beta for B is 0.38. The expected returns of both stocks lie on the security market line.

a) What is the expected return of the market?

b) What is the risk-free rate?

c) What is the beta of a portfolio made of these two assets with equal weights?

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