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a. What is the beta of a portfolio comprised of the following securities? (3 points) Stock Amount Invested Beta $2,000 1.20 $

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Answer #1

a. Portfolio beta = [($2,000 / $10,000) × 1.20] + [($3,000 / $10,000) × 1.46] + [($5,000 / $10,000) × 0.72] = 1.038

b. Required rate of return = Risk-free rate + Portfolio beta(Market risk premium)

Required rate of return = 0.045 + 1.038(0.09)

Required rate of return = 0.13842 or 13.842%

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