Problem 8-2

• : Beta of portfolio is the weighted average of betas of stocks in the portfolio

Stock A: $20,000 0.6 Stock B: $75,000 2.5 Total Investment: $95,000 Portfolio Beta: 2.1

Problem 8-7

Calculate the Beta of the portfolio using weighted average formula; then apply SML formula Stock Investment Beta A $460,000 1.5 B $500,000 -0.5 C $1,260,000 1.25 D $2,600,000 0.75

Total Investment: $4,820,000 Portfolio Beta: 0.822614108 0.82 risk-free rate: 4% market rate: 8% Required Return: 7.2800%