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Question 3: Stock Z has a beta of 1.1, an expected return of 12.5 percent, and lies on the security market line. A risk-free security
Question 3: Stock Z has a beta of 1.1, an expected return of 12.5 percent, and lies on the security market line. A risk-free security is yielding 3.2 percent. You want to create a portfolio consisting of stock Z and the risk-free security such that the portfolio beta is 0.8. What rate of return should you expect to earn on your portfolio? (4 Marks)
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