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problem: Stock A has a 10 percent expected return, a beta coefficient of 0.9, and a 35 percent standard deviation of expected returns. Stock B has a 12.5% expected return, a beta coefficient of 1.2, & a 25% standard deviation. The risk-free rate is 6 percent, & the market risk premium is 5%.

[A] Compute the required return of a portfolio that has $7500 invested in Stock A and $2500 invested in Stock B.

[B] If the market risk premium increase to six percent, which of the two stocks would have the larger rise in its required return?

Portfolio Management, Finance

  • Category:- Portfolio Management
  • Reference No.:- M919626

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