Question

In: Finance

"The characteristics of two stocks traded in the economy are as follows: Stock A, expected return=13%,...

"The characteristics of two stocks traded in the economy are as follows: Stock A, expected return=13%, standard deviation=60%; Stock B, expected return=8%, standard deviation=40%. Correlation between A and B is -1. If the market risk premium is 4%, what is the expected return for a portfolio with a beta of 1.5 in a CAPM universe?"

16%

15%

14%

None of the above

Solutions

Expert Solution

Correct answer: 16%

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -


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