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Security Actual Return Std Dev Beta A 29% 20% 1.4 B 22% 25% 0.6 Risk free 4% 0% 0 In one year, we observe that

Security Actual Return Std Dev Beta

A 29% 20% 1.4

B 22% 25% 0.6

Risk free 4% 0% 0

In one year, we observe that Stock B exactly met its expectations.

5) What is the portfolio beta if you invest 25% in A, 45% in B, and 30% in the risk free asset?

6) What is the market premium?

7) Did Stock A (over/under/exactly) perform its expected return?

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