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Shares of company ABC have a beta of 1.2 and an expected return of 17.9%. Shares of company XYZ Ltd have a beta of 1.7
Shares of company ABC have a beta of 1.2 and an expected return of 17.9%. Shares of company XYZ Ltd have a beta of 1.7 and an expected return of 19.7%. If the risk-free rate is 2.2% and the market risk premium is 7%, are these shares correctly priced?
b) You want to create a portfolio twice as risky as the market, and you have $500,000 to invest. Given this information, fill in the rest of this table:
| ASSET | INVESTMENT | BETA |
| Share A | $150,000 | 1.5 |
| Share B | $200,000 | 2 |
| Share C |
| 2.5 |
| Risk-free asset |
|
|
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