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Suppose an investor wants to include Goodman Industries stock in his or her portfolio. Stocks A, B, and C are currently in the portfolio, and
Suppose an investor wants to include Goodman Industries stock in his or her portfolio. Stocks A, B, and C are currently in the portfolio, and their betas are 0.769, 0.985, and 1.423, respectively. Calculate the new portfolios required return if it consists of 25% of Goodman, 15% of Stock A, 40% of Stock B, and 20% of Stock C. PLEASE SHOW WORK IN EXCEL WITH FORMULA.
Beta | Portfolio Weight | ||||
Goodman | 25% | ||||
Stock A | 0.769 | 15% | |||
Stock B | 0.985 | 40% | |||
Stock C | 1.423 | 20% | |||
100% | |||||
Portfolio Beta = | |||||
Required return on portfolio: | = | Risk-free rate + | Market Risk Premium * | * Beta | |
= | |||||
= |
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