You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and anexpected return of 15%. The other stock has an expected return of 21%. The total portfolio is equally as risky as themarket (i.e.Bp=1).What is the beta for the other stock in your portfolio?What is the expected return of the risk-free asset?What is the expected return of the market?What is the expected return of your portfolio?

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What is the beta for the other stock in your portfolio? What is the expected return of the risk-free asset?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 18P

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Question

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and an
expected return of 15%. The other stock has an expected return of 21%. The total portfolio is equally as risky as the
market (i.e.Bp=1).
What is the beta for the other stock in your portfolio?
What is the expected return of the risk-free asset?
What is the expected return of the market?
What is the expected return of your portfolio?

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