Shares of company ABC have a beta of 1.2 and an expected return of 17.9%. Shares...

Shares of company ABC have a beta of 1.2 and an expected return of 17.9%. Shares of company XYZ Ltd have a beta of 1.7 and an expected return of 19.7%. If the risk-free rate is 2.2% and the market risk premium is 7%, are these shares correctly priced?

b) You want to create a portfolio twice as risky as the market, and you have $500,000 to invest. Given this information, fill in the rest of this table:

ASSET	INVESTMENT	BETA
Share A	$150,000	1.5
Share B	$200,000	2
Share C		2.5
Risk-free asset

Expert Solution

b.

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jeff jeffy answered 2 years ago

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