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LLLL LL.CUMS Stock is currently overvalued? 25. Suppose that a portfolio consists of the following stocks: Stock Amount Chevron $20,000 General Electric 40,000 Whirlpool 40,000
LLLL LL.CUMS Stock is currently overvalued? 25. Suppose that a portfolio consists of the following stocks: Stock Amount Chevron $20,000 General Electric 40,000 Whirlpool 40,000 Beta 0.70 1.30 1.10 The risk-free rate (fp) is 5 percent and the market risk premium (rm-fs) is 8.8 percent. a. Determine the beta for the portfolio. b. Determine how much General Electric stock one must sell and reinvest in Chevron stock in order to reduce the beta of the portfolio to 1.00. c. Determine the expected return on the portfolio in Parts a and b. 5. Consider again the SML given by Equation 8.18 and shown in
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