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(Portfolio beta and CAPM)You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings: Portfolio Weightings Asset
(Portfolio beta and CAPM)You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings:
Portfolio Weightings |
| |||
Asset | Beta | First Portfolio | Second Portfolio | |
A | 2.40 | 20% | 30% | |
B | 0.90 | 20% | 30% | |
C | 0.60 | 30% | 20% | |
D | 1.80 | 30% | 20% |
What is the beta on each portfolio?
b.Which portfolio is riskier?
c.If the risk-free rate of interest were 3 percent and the market risk premium were 7.5 percent,
what rate of return would you expect to earn from each of the portfolios?
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