Question
Your investment portfolio includes 10,000 shares of Stock A with the current market price of $1.50 per share and 20,000 shares of Stock B with
Your investment portfolio includes 10,000 shares of Stock A with the current market price of $1.50 per share and 20,000 shares of Stock B with the current market price of $0.75 per share.Stock A has a beta value of 1.2 with an expected return of 12% and a standard deviation of 15%; and Stock B has a beta value of 0.8 with an expected return of 7% and a standard deviation of 10%. The correlation between the two stocks is -0.2. The risk-free rate is 3% and the market risk premium is 5%.
Determine the expected return, the standard deviation of returns, and the beta value for your investment portfolio with the two stocks.
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Principles of Finance
Authors: Scott Besley, Eugene F. Brigham
6th edition
9781305178045, 1285429648, 1305178041, 978-1285429649
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