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Stock A has a beta of 1.5 and an expected return of 10%. Stock B has a beta of 1.1 and an expected return of
Stock A has a beta of 1.5 and an expected return of 10%. Stock B has a beta of 1.1 and an expected return of 8%. The current market price for stock A is $20 and the current market price for stock B is $30. The expected return for the market is 7.5%. (assume the risk free asset is a T-bill).
A) What is the risk free rate?
B) What is the expected return on a portfolio consisting of 100 shares of stock A, 60 shares of stock B and $2,200 worth of T-bills.
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