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Essentials Of Investments
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Publisher: Mcgraw-hill Education,
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7. Portfolio Risk and Return. Suppose that the S&P 500, with a beta of 1.0, has an expected return of 10% and T-bills provide a risk-free return of 4%. (LO12-1)
- How would you construct a portfolio from these two assets with an expected return of 8%?
Specifically, what will be the weights in the S&P 500 versus T-bills? - How would you construct a portfolio from these two assets with a beta of .4?
- Find the risk premiums of the portfolios in parts (a) and (b), and show that they are proportional to their betas.
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