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You've assembled the following portfolio: Stock Beta Portfolio weight 1 1.7 0.2 2 1.1 0.6 3 0.5 0.2 The expected market return is 5% and
You've assembled the following portfolio:
| Stock | Beta | Portfolio weight |
|---|---|---|
| 1 | 1.7 | 0.2 |
| 2 | 1.1 | 0.6 |
| 3 | 0.5 | 0.2 |
The expected market return is 5% and the risk-free rate is 2%. Assume that the CAPM holds.
1. What is the beta of the portfolio?
2. What is the expected return of your portfolio?
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