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What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and
What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. Do you expect the investment to be a good one for the coming year if betas for the two portfolio components are 0.6 and 1.3, respectively? Justify your answer with numerical work. Probability of State of Economy Return if State Occurs State of Economy Stock S Stock T 15% oom 25% 30% Normal 50% 15% 10% Recession -10% 13% 25%
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