Homework Answers
Total investment=(80,000+50,000+70,000)=$200,000
Portfolio beta=Respective beta*Respective investment weight
=(80,000/200,000*1.5)+(50,000/200,000*2)+(70,000/200,000*0.85)
=1.3975
Expected return=risk-free rate +Beta*(market rate- risk-free rate)
=2+1.3975*(7-2)
=8.9875%
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