Calculate the Expected Rate of Return for the Following Portfolio

question 49

Essay

Calculate the expected rate of return for the following portfolio, based on a Treasury bill yield of 4% and an expected market return of 13%:
$$\begin{array} { | c | c | c | } \hline \text { Stock } & \text { \% of Portfolio } & \text { Beta } \\\hline \text { A } & 20 \% & 1.6 \\\hline \text { B } & 25 \% & 1.2 \\\hline \text { C } & 10 \% & 1.0 \\\hline \text { D } & 30 \% & 0.9 \\\hline \text { E } & 15 \% & 0.8 \\\hline\end{array}$$

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Definitions:

Intermediate Product

Goods that are used in the production process to make other goods, not final products themselves but inputs into the production of final products.

Functional Lines

The divisions within an organization based on functions or roles, such as marketing, finance, and human resources.

Functional Expertise

Specialized knowledge or proficiency in a particular area or department of a business, contributing to its success and efficiency.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a lower cost per unit as output increases.