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You wish to invest in a portfolio of stocks A (50%) and B (50%). The risk free rate is 4%. AB Expected Return (%) 10 20 Beta

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Answer #1

The portfolio beta is computed as shown below:

= Beta of A x Amount to be invested in stock A + Beta of B x Amount to be invested in stock B

= 1.3 x 0.50 + 1.6 x 0.50

= 1.45

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