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The current risk free rate of interest is stated at 5% per annum. Royal plc shares have a beta of 1.2 and an expected return
The current risk free rate of interest is stated at 5% per annum. Royal plc shares have a beta of 1.2 and an expected return of 14% per annum. Assume that the CAPM holds.
- (i) What is the expected return on the market?
- (ii) Agava plc shares have a beta of 0.9. What is the expected return on these shares?
- (iii) You have invested a total of 10,000 in Royal plc and Agava plc, and the beta of the portfolio is 1.08. How much did you invest in each company? What is the expected return on the portfolio?
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Cases in Financial Reporting
Authors: Michael J. Sandretto
1st edition
538476796, 978-0538476799
