You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock Investment A E B C $202,000 303,000 505,000 Beta 1.59 0.59 1.16 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 15 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.)

You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock Investment A E B C $202,000 303,000 505,000 Beta 1.59 0.59 1.16 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 15 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.)

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 15MC

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