Question
You are considering investing your money in two stocks (A and B). The risk-free interest rate amounts to 3%. The total return on the market
You are considering investing your money in two stocks (A and B). The risk-free interest rate amounts to 3%. The total return on the market portfolio is 10%.
a) Calculate the expected return on the following two shares with specified beta values. Share Beta Expected return A 0.3 B 1.2
b) You form a portfolio of shares A and B. Assume that you weight the proportion of the shares in the portfolio (A = 7% and B = 30%). Calculate the total return on the portfolio
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a To calculate the expected return on shares A and B we can use the Capital Asset Pricing Model CAPM ...
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Step: 2
Step: 3
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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective
Authors: James M Wahlen, Stephen P Baginskl, Mark T Bradshaw
7th Edition
9780324789423, 324789416, 978-0324789416
