Question
Question: Using CAPM. A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent. a.
Question:
| Using CAPM.A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent. |
| a.What is the expected return on a portfolio that is equally invested in the two assets? |
| b.If a portfolio of the two assets has a beta of .7, what are the portfolio weights? |
| c.If a portfolio of the two assets has an expected return of 9 percent, what is its beta? |
| d.If a portfolio of the two assets has a beta of 2.3, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain. |
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Business Mathematics
Authors: Charles MillerStanley SalzmanStanley SalzmanGary Clendenen
11th Edition
0321500121, 9780321500120
