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Question 7 (5 points) Stock A has a beta of 1.2 and stock B has a beta of 0.8. Assume ry = 2% and E[rm]
Question 7 (5 points) Stock A has a beta of 1.2 and stock B has a beta of 0.8. Assume ry = 2% and E[rm] = 10%. You own 10 shares of stock A, each of which costs $7 and 5 shares of stock B each of which costs $9. a) According to the CAPM, what are the expected returns for each stock? State your solutions as a percent with one decimal place. b) What is the expected return of your portfolio? State your solution as a percent with one decimal place. c) What is the beta of your portfolio? State your solution as a decimal with one decimal place
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