CORPORATE FINANCE
CORPORATE FINANCE
12th Edition
ISBN: 9781307702804
Author: Ross
Publisher: MCG/CREATE
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Chapter 12, Problem 4QAP
Summary Introduction

Adequate information:

Beta 1 of Stock A β1SA = 1.55

Beta 2 of Stock A β2SA = 0.80

Beta 3 of Stock A β3SA = 0.05

Beta 1 of Stock B β1SB = 0.81

Beta 2 of Stock B β2SB = 1.25

Beta 3 of Stock B β3SB = -0.20

Beta 1 of Stock C β1SC = 0.73

Beta 2 of Stock C β2SC = -0.14

Beta 3 of Stock C β3SC = 1.24

Risk premium of Stock A RpA= 0.049

Risk premium of Stock B RpB= 0.038

Risk premium of Stock C RpC= 0.053

Weight of Stock A WA= 0.20

Weight of Stock B WB= 0.20

Weight of Stock C WC= 0.60

Risk-free rate Rf = 0.032

To compute: Return on portfolio

Introduction: Portfolio return refers to the return that is anticipated on the portfolio as a whole including all the securities.

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