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Three friends, Harry, Lee and Kim, are discussing their investments. Harry and Lee have both invested $10,000 in efficient portfolios. Harry has invested 60% of
Three friends, Harry, Lee and Kim, are discussing their investments. Harry and Lee have both invested $10,000 in efficient portfolios. Harry has invested 60% of his money in the market portfolio and the remainder in the risk-free asset. . Lee has borrowed $2000 at the risk-free rate of return and invested a total of $12,000 in the market portfolio. Kim has invested $10,000 in a portfolio containing two stocks, the Sirius Cybernetics Corporation and the Jupiter Mining Corporation. . $7400 has been invested in Jupiter and the remainder has been invested in Sirius. The covariance between Sirius and the market is 0.025117. The beta of Jupiter is 0.5. The following table shows the expected return and standard deviation of Kim's stocks, the market portfolio and the risk-free asset. Asset Exp Return Std Dev Sirius Cybernetics Corporation 16.7% 18.2% Jupiter Mining Corporation 12.8% 12.3% Market portfolio 10.7% 13.9% Risk-free asset 2.3% 0% What is the expected return on Harry's portfolio
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