Problem

Suppose that a portfolio consists of the following stocks: The risk-f...

Suppose that a portfolio consists of the following stocks:

The risk-free rate is 5 percent and the market risk premium is 8.8 percent.

a. Determine the beta for the portfolio.

b. Determine how much General Electric stock one must sell and reinvest in Chevron stock in order to reduce the beta of the portfolio to 1.00.

c. Determine the expected return on the portfolio in parts a and b.

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Solutions For Problems in Chapter 8

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