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You have a portfolio of two stocks held in equal weights. The ABC stock has a beta of 1.4, and the XYZ stock has a
You have a portfolio of two stocks held in equal weights. The ABC stock has a beta of 1.4, and the XYZ stock has a beta of -0.9. The risk free rate is 3% and the market risk premium is 8%. What is the return on the portfolio? Why should an investor hold a portfolio rather than invest in a single stock? The investor can maximize risk for a given level of expected return. An investor can eliminate unsystematic risk. The investor can eliminate all risk while expecting a return that is greater than the risk-free rate. The investor can eliminate systematic risk, which is synonymous with company-specific risk
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