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Essentials of Corporate Finance, Eighth Edition 1.Youownaportfolioequallyinvestedinarisk-freeassetandtwostocks.Ifoneofthestockshasabetaof1.42andthetotalportfolioisequallyasriskyasthemarket,whatmustthebetabefortheotherstockinyourportfolio? 2. A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset
Essentials of Corporate Finance, Eighth Edition - 1.Youownaportfolioequallyinvestedinarisk-freeassetandtwostocks.Ifoneofthestockshasabetaof1.42andthetotalportfolioisequallyasriskyasthemarket,whatmustthebetabefortheotherstockinyourportfolio?
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- 2.A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent.
- What is the expected return on a portfolio that is equally invested in the two assets?
- If a portfolio of the two assets has a beta of .7, what are the portfolio weights?
- If a portfolio of the two assets has an expected return of 9 percent, what is its beta?
- If a portfolio of the two assets has a beta of 2.3, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
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