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stranahan stranahan
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Posts: 3324
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2 years ago
Both assets B and C plot on the SML. Asset B has a beta of 1.3 and an expected return of 13.1%. Asset C has a beta of .50 and an expected return of 7.50%. The risk-free rate is 4% and the expected return on the market portfolio is 11%. If you wish to hold a portfolio consisting of assets B and C, and have a portfolio beta equal to 1.0, what proportion of the portfolio must be in asset C?
A) 0.75
B) 0.50
C) 0.375
D) 0.625
Textbook 

Financial Management: Core Concepts


Edition: 2nd
Author:
Read 191 times
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crackerspoppycrackerspoppy
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Posts: 344
2 years ago
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C -- Rp = (1 - w) * rb + (w) * rc = 11% = (1 - w) * 13.1% + w * 7.5%, w = 0.375
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