Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:4. You are an investment advisor. You currently own two stocks, A and B, with the
following characteristics:
Expected Return
Beta
X
Y
10%
0.8
16%
1.5
The current risk-free rate is 2 percent, and the expected return on the market is 12
percent.
How would you change your holdings of the two stocks (i.e., for each, would you
sell or buy more)? Show your calculations (and explain).
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