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.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

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