The following three stocks are available in the market: E(R) Beta Stock A 11.3% 1.22 Stock B 13.2 1.02 Stock C 15.7 1.42 Market 14.7 1.00 Assume the market model is valid. a. The return on the market is 15.5 percent and there are no unsystematic surprises in the returns. What is the return on each stock? b. Assume a portfolio has weights of 20 percent Stock A, 35 percent Stock B, and 45 percent Stock C. The return on the market is 15.5 percent and there are no unsystematic surprises in the returns. What is the return on the portfolio?

The following three stocks are available in the market: E(R) Beta Stock A 11.3% 1.22 Stock B 13.2 1.02 Stock C 15.7 1.42 Market 14.7 1.00 Assume the market model is valid. a. The return on the market is 15.5 percent and there are no unsystematic surprises in the returns. What is the return on each stock? b. Assume a portfolio has weights of 20 percent Stock A, 35 percent Stock B, and 45 percent Stock C. The return on the market is 15.5 percent and there are no unsystematic surprises in the returns. What is the return on the portfolio?

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 4P: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market...

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