You are forming an equally weighted portfolio of stocks. Many stocks have the same beta of...
You are forming an equally weighted portfolio of stocks. Many
stocks have the same beta of 0.84 for Factor 1 and the same beta of
1.69 for Factor 2. All stocks also have the same expected return of
11 percent. Assume a two-factor model describes the return on each
of these stocks.
a) Write the equation of the returns on your portfolio if you place
only five stocks in it.
b) Write the equation of the returns on our portfolio if you place
in it a very large number of stocks that all have the same expected
returns and the same betas.
**Please show work and provide excel formulas**
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