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You are investing in a portfolio consisting two shares - D and E. You plan to invest 70% of your available funds in D and the balance in E. You will refer this portfolio as Portfolio F. The expected returns of each share, standard deviation of returns and beta of each of these shares, the market portfolio return (M) and the risk-free asset return (Rf), are shown in the table below Investment Expected return Standard deviation Beta D 6.75% 4.25% 1.3 E 2.46% 2.99% 0.7 F ? M 6.25% 5.75% Rf 2.20% c) What is the expected return on Portfolio F, based on the CAPM?

You are investing in a portfolio consisting two shares - D and E. You plan to invest 70% of your available funds in D and the balance in E. You will refer this portfolio as Portfolio F. The expected returns of each share, standard deviation of returns and beta of each of these shares, the market portfolio return (M) and the risk-free asset return (Rf), are shown in the table below Investment Expected return Standard deviation Beta D 6.75% 4.25% 1.3 E 2.46% 2.99% 0.7 F ? M 6.25% 5.75% Rf 2.20% c) What is the expected return on Portfolio F, based on the CAPM?

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 3P: Two-Asset Portfolio Stock A has an expected return of 12% and a standard deviation of 40%. Stock B...
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You are investing in a portfolio consisting two shares - D and E. You plan to invest 70% of your available funds in D and the balance in E. You will refer this portfolio as Portfolio F. The expected returns of each share, standard deviation of returns and beta of each of these shares, the market portfolio return (M) and the risk-free asset return (Rf), are shown in the table below: Investment Expected return Standard deviation Beta 6.75% 4.25% 1.3 E 2.46% 2.99% 0.7 F ? ? ? M 6.25% 5.75% Rf 2.20% ? ? Lin the - tod r O --- c) What is the expected return on Portfolio F, based on the CAPM?
Transcribed Image Text:You are investing in a portfolio consisting two shares - D and E. You plan to invest 70% of your available funds in D and the balance in E. You will refer this portfolio as Portfolio F. The expected returns of each share, standard deviation of returns and beta of each of these shares, the market portfolio return (M) and the risk-free asset return (Rf), are shown in the table below: Investment Expected return Standard deviation Beta 6.75% 4.25% 1.3 E 2.46% 2.99% 0.7 F ? ? ? M 6.25% 5.75% Rf 2.20% ? ? Lin the - tod r O --- c) What is the expected return on Portfolio F, based on the CAPM?
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