Stock X has an expected return of 10%, a beta coefficient of 0.9, and standard deviation of expected returns of 35%. Stock Y has an expected return of 12.5%, a beta of 1.2, and standard deviation 25%. The risk free rate is 8%, and the market risk premium is 6%. Calculate the required rate of return (RRR) for this portfolio, which has $35,700 invested in Stock X and $20,500 invested in Stock Y.
Stock X has an expected return of 10%, a beta coefficient of 0.9, and standard deviation of expected returns of 35%. Stock Y has an expected return of 12.5%, a beta of 1.2, and standard deviation 25%. The risk free rate is 8%, and the market risk premium is 6%. Calculate the required rate of return (RRR) for this portfolio, which has $35,700 invested in Stock X and $20,500 invested in Stock Y.
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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am. 138.
Transcribed Image Text:Stock X has an expected return of 10%, a beta coefficient of 0.9, and
standard deviation of expected returns of 35%. Stock Y has an
expected return of 12.5%, a beta of 1.2, and standard deviation 25%.
The risk free rate is 8%, and the market risk premium is 6%.
Calculate the required rate of return (RRR) for this portfolio, which
has $35,700 invested in Stock X and $20,500 invested in Stock Y.
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