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You want to build a portfolio of two stocks: Stock A and Stock B. Stock A has a beta of 1.5 and Stock B has

You want to build a portfolio of two stocks: Stock A and Stock B. Stock A has a beta of 1.5 and Stock B has a beta of .4. If the current risk-free interest rate is 3% and the market risk premium is 10%, what proportion of your portfolio do you have to invest in stock A and B, respectively, in order to obtain a portfolio with an expected return of 15%?

Answer: Invest 72.7% of the portfolio in Stock A and 27.3% in Stock B

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