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An investor currently has all of his wealth in Treasury bills. He is considering investing one-third...

An investor currently has all of his wealth in Treasury bills. He is considering investing one-third of his funds in General Electric, whose beta is 1.5, with the remainder left in Treasury bills. The expected risk-free rate (Treasury bills) is 4 percent and the market risk premium is 5.1 percent. Determine the beta and the expected return on the proposed portfolio. Round your answers to two decimal places.

Portfolio's Beta:

Portfolio's Expected Return:   %

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Answer #1

A B E F H 1 2 3 a) Beta of a Portfolio is a weighted average beta of all stocks in a Portfolio. In the given problem, it is tA B D F H 24 25 26 27 28 29 Expected Return of a Portfolio = Expected Return of General Electric * Weight of General Electric

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