Currently, the risk-free return is 4 percent, and the expected market rate of return is 11 percent. What is the expected return of the following three-stock portfolio? Amount Invested Beta $200,000 0.7 $300,00 1.2 $500,000 2.2

Currently, the risk-free return is 4 percent, and the expected market rate of return is 11 percent. What is the expected return of the following three-stock portfolio? Amount Invested Beta $200,000 0.7 $300,00 1.2 $500,000 2.2

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 8PROB

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Question

Currently, the risk-free return is 4 percent, and the expected market rate of return is 11 percent. What is the expected return of the following three-stock portfolio?

Amount Invested	Beta
$200,000	0.7
$300,00	1.2
$500,000	2.2

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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