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Assume that both Apple and Yahoo plot on the SML. Apple has a beta of 2.6 and an expected return of ...

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Assume that both Apple and Yahoo plot on the SML. Apple has a beta of 2.6 and an expected return of ...

Assume that both Apple and Yahoo plot on the SML. Apple has a beta of 2.6 and an expected return of 21.2%. Yahoo has a beta of 0.90 and an expected return of 9.3%. The expected return on the market portfolio is 10%and the risk-free rate is 3%. If you wish to hold a portfolio consisting of Apple and Yahoo and have a portfolio beta equal to 1.5, what proportion of the portfolio must be in Apple? What is the expected return on the portfolio?

   Apple   Yahoo   Market Portfolio   Risk-free Asset
Beta   2.6   0.9   1.0   0.0
Expected Return   21.2%   9.3%   10.0%   3.0%

Textbook

Financial Management: Core Concepts

Edition: 2^nd

Author: Brooks

Read 335 times

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Decrepit_

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More solutions for this book are available here

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stranahan Author

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7 years ago

Thank you for the help. I had a few questions on a few of them and this really confirmed my answers.

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fareeda n.

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Thank u

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