JR Has a Three Stock Portfolio A)550%
B)6

question 94

Multiple Choice

J.R. has a three stock portfolio. Details of the portfolio are provided in the table. If the T-bill rate is 5% and the market risk premium is 5.5%. According to the CAPM, what is the expected return of J.R.'s portfolio? $$\begin{array} { | c | c | c | } \hline \text { Stock } & \text { Investment } & \text { Beta } \\\hline \begin{array} { c } \text { Motherlode } \\\text { Mines }\end{array} & \$ 30,000 & 1.6 \\\hline \text { Lewd Lemons } & \$ 40,000 & 1.0 \\\hline \text { Bonanza Beef } & \$ 30,000 & 0.8 \\\hline\end{array}$$

• A)5.50%
• B)6.16%
• C)10.00%
• D)10.50%
• E)11.16%

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Definitions:

Indirect Quote

A way of quoting exchange rates in foreign exchange markets, representing the amount of foreign currency required to buy one unit of the domestic currency.

Direct Quote

A direct quote is a foreign exchange rate expressed in terms of how much of the domestic currency is required to buy one unit of the foreign currency.

British Pounds

The official currency of the United Kingdom, denominated as GBP (Great British Pound).

Exchange Rate

The price of one currency in terms of another currency.