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You have a portfolio which consists of 75% of stock 1 (o^2 = 0.16) and 25% of stock 2 (o^2 = 0.09). Covariances : o1,2 = 0.02 , o1,m = 0.064 , 02,m = 0.032 and o m^2 = 0.04 (market variance). Expected return of market rm =0.12, risk free rate rf =0.04 and CAPM is valid. Find the expected returns of stocks 1 and 2 and portfolio %3D

You have a portfolio which consists of 75% of stock 1 (o^2 = 0.16) and 25% of stock 2 (o^2 = 0.09). Covariances : o1,2 = 0.02 , o1,m = 0.064 , 02,m = 0.032 and o m^2 = 0.04 (market variance). Expected return of market rm =0.12, risk free rate rf =0.04 and CAPM is valid. Find the expected returns of stocks 1 and 2 and portfolio %3D

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
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 2P: AA Corporations stock has a beta of 0.8. The risk-free rate is 4%, and the expected return on the...
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You have a portfolio which consists of 75% of stock 1 (o^2 = 0.16) and 25% of stock 2 (o^2 = 0.09). Covariances : o1,2 = 0.02 , o1,m = 0.064 , 02,m = 0.032 and o m^2 = 0.04 (market variance). Expected return of market rm =0.12, risk free rate rf =0.04 and CAPM is valid. Find the expected returns of stocks 1 and 2 and portfolio
Transcribed Image Text:You have a portfolio which consists of 75% of stock 1 (o^2 = 0.16) and 25% of stock 2 (o^2 = 0.09). Covariances : o1,2 = 0.02 , o1,m = 0.064 , 02,m = 0.032 and o m^2 = 0.04 (market variance). Expected return of market rm =0.12, risk free rate rf =0.04 and CAPM is valid. Find the expected returns of stocks 1 and 2 and portfolio
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