Max wants a portfolio with a beta of 1.2. He currently has two stocks in his portfolio. Stock A with a beta of 1.5 and Stock B with a beta of 0.8. If the risk-free rate is 2% and the market return is 8%, what will his portfolio’s expected return be and how should he allocate his money among the two stocks?
Max wants a portfolio with a beta of 1.2. He currently has two stocks in his portfolio. Stock A with a beta of 1.5 and Stock B with a beta of 0.8. If the risk-free rate is 2% and the market return is 8%, what will his portfolio’s expected return be and how should he allocate his money among the two stocks?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 15MC
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Max wants a portfolio with a beta of 1.2. He currently has two stocks in his portfolio. Stock A with a beta of 1.5 and Stock B with a beta of 0.8. If the risk-free rate is 2% and the market return is 8%, what will his portfolio’s expected return be and how should he allocate his money among the two stocks?
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