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Determine what is the expected return on asset

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Reference no: EM132539732

Question 1: The current risk free rate is 4% and the expected risk premium on the market portfolio is 7%. An asset has a beta of 1.2. What is the expected return on this asset? Interpret the number 1.2.

a. An asset has a beta of 0.6. What is the expected return on this asset?

b. If we invest 2 of our money in the first asset and 2 of our money in the second, what is our portfolio beta and what is its expected return?

c. Relative to the first asset our portfolio has a smaller expected return, why?

d. Does this mean the first asset is better than the portfolio?

Reference no: EM132539732

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