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plz type the answer down AND SHOW STEP BY STEP,thanks a lot! The portfolio manager of Top One Incorporated is considering a $3 million investment
plz type the answer down AND SHOW STEP BY STEP,thanks a lot!
- The portfolio manager of Top One Incorporated is considering a $3 million investment portfolio containing the four stocks: Stock A, Stock B, Stock C and Stock D. The required rate of return on the market is 11.00% and the risk free rate is 5.00%.
Stock | Amount | Beta |
A | $1,075,000 | 1.20 |
B | $675,000 | 0.50 |
C | $750,000 | 1.40 |
D | $500,000 | 0.75 |
- Compute the beta and expected return of the portfolio (Note: Please keep the answers in two decimal places). What conclusion can you make based on the beta of portfolio as compared to beta of individual stocks?
2.By using the information from question b. and answers from bi) above, construct a security market line (SML) and provide relevant interpretation based on the plotted SML.
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