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BUS 405 Week 4 DQ 2 Portfolio Weights
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Week 4 – DQ2 – Portfolio Weights
Complete Problem 10 from the Questions and Problems section of Chapter 12: A stock has a beta of .9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent.a. What is the expected return on a portfolio that is equally invested in the two assets?b. If a portfolio of the two assets has a beta of .5, what are the portfolio weights?c. If a portfolio of the two assets has an expected return of 8 percent, what is its beta?d. If a portfolio of the two assets has a beta of 1.80, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
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