Calculate the expected return on the portfolio

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Reference no: EM1366832

Details: Suppose the following information about a five stock portfolio:

Stock Percent of Portfolio Beta
A 20% 1.6
B 25% 1.2
C 10% 1.0
D 30% 0.9
E 15% 0.8

a. Determine the portfolio beta for the above portfolio. Show all work.
b. Determine the expected return on the portfolio based on a Treasury bill yield of 4% and an expected market return of 13%. Show all work.
c. The CFO of your firm asks you to precisely explain the methodology that you have used in both part a) and part b) above. Please do this.
d. Determine the expected return on stock E using the same market parameters given in part b). Discuss how the risk and return of this stock compares to the market portfolio.

 

Reference no: EM1366832

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