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Based on the information given in the following table, what is the expected return on a portfolio with 25% in stock A, 50% in stock

Based on the information given in the following table, what is the expected return on a portfolio with 25% in stock A, 50% in stock B, and the rest in the risk-free asset based on CAPM? Stock A B

Correlation with the market

0.5

1.0

Average Annual Return

(Based on Historical Data)

10%

8%

Standard Deviation (Yr.)

15%

15%

Correlation (A, B)

0.5

The standard deviation of the market (%/Yr.)

15%

Risk-Free Rate (Yr.)

3%

Risk Premium on the Market (Yr.)

5%

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