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PLEASE ANSWER BOTH A AND B Assume that the CAPM holds, the risk-free rate is 1% per year, the expected return on the market is
PLEASE ANSWER BOTH A AND B
Assume that the CAPM holds, the risk-free rate is 1% per year, the expected return on the market is 11% per year and that the annualized volatility (standard deviation) of market returns is 20%. Assume that the beta of Kroger is 0.5, the beta of GE is 1.0, and their respective annualized return volatilities are 25% and 30%. Suppose that you invest 30% in Kroger and 70% in GE. (a) Compute the expected return of Kroger and GE. (7 points) (b) Compute the beta and expected return of your portfolio. (7 points)
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