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Year Stock A Stock B Market 2012 11% 12% 15% 2013 18% 9% 11% 2014 5% 4% 6% 2015 -14% -7% -10% 2016 6% 3%

Year Stock A Stock B Market
2012 11% 12% 15%
2013 18% 9% 11%
2014 5% 4% 6%
2015 -14% -7% -10%
2016 6% 3% 5%
2017 20% 13% 16%

The table above shows the returns over the last six years.

The risk free rate is currently 4% and the market risk premium is 6%.

  1. Calculate the betas for stocks A and B
  2. Calculate the required rates of return for stocks A and B

If you created a portfolio with 65% of the weight invested in stock A and 35% of the weight invested in stock B,

what would be the required rate of return on the portfolio?

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