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Assume that you hold a diversified $90,000 portfolio with a beta of 1.20, and that you are in the process of buying 1,000 shares of a high-tech stock at $10 a share with a beta of 1.70, and adding it to this portfolio. Also assume that risk-free rate is 2%, and that the expected rate of return on the market is 11.4%. Based on the CAPM, what would be the expected rate of return for your portfolio after the purchase of this stock?

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Financial Management, Finance

Category:- Financial Management
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