Problem

Market Model The following three stocks are available in the market: E(R) ??...

Market Model The following three stocks are available in the market:

E(R) ??

Assume the market model is valid.

a. Write the market model equation for each stock.

b. What is the return on a portfolio with weights of 30 percent Stock A , 45 percent Stock B , and 25 percent Stock C ?

c. Suppose the return on the market is 15 percent and there are no unsystematic surprises in the returns. What is the return on each stock? What is the return on the portfolio?

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Solutions For Problems in Chapter 12

10CQ
10QP

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