Question
Suppose MGM has a beta of 3.32 and AEP has a beta of 0.28. If the risk-free interest rate = 4.0% and the market risk
Suppose MGM has a beta of 3.32 and AEP has a beta of 0.28. If the risk-free interest rate = 4.0% and the market risk premium = 10%, according to the CAPM:
What is the expected return of MGM stock?
What is the expected return of AEP stock?
What is the beta of a portfolio that consists of 60% of MGM and 40% of AEP?
What is the expected return of that portfolio with the beta that you found in part c.?
What is the beta of a portfolio that consists of 40% of MGM and 60% of AEP?
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Financial Informatics An Information Based Approach To Asset Pricing
Authors: Dorje C Brody, Lane Palmer Hughston, Andrea Macrina
1st Edition
9811246483, 978-9811246487
