Question
Stock Y has a beta of 1.50 and an expected return of 16.2 percent. Stock Z has a beta of .95 and an expected return
Stock Y has a beta of 1.50 and an expected return of 16.2 percent. Stock Z has a beta of .95 and an expected return of 12.5 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
What is the portfolio weight of each stock?
Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.
What is the expected return of your portfolio?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.
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