Assume That Both Apple and Yahoo Plot on the SML

question 22

Essay

Assume that both Apple and Yahoo plot on the SML.Apple has a beta of 2.6 and an expected return of 21.2%.Yahoo has a beta of 0.90 and an expected return of 9.3%.The expected return on the market portfolio is 10%and the risk-free rate is 3%.If you wish to hold a portfolio consisting of Apple and Yahoo and have a portfolio beta equal to 1.5,what proportion of the portfolio must be in Apple? What is the expected return on the portfolio? $$\begin{array} { | l | c | c | c | c | } \hline & \text { Apple } & \text { Yahoo } & \text { Market Portfolio } & \text { Risk-free Asset } \\\hline \text { Beta } & 2.6 & 0.9 & 1.0 & 0.0 \\\hline \text { Expected Return } & 21.2 \% & 9.3 \% & 10.0 \% & 3.0 \% \\\hline\end{array}$$

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Definitions:

Supply Management

The process of managing relationships with suppliers and controlling all the materials needed to produce goods or services.

Horizontal Integration

A strategy where a firm grows by acquiring or merging with its competitors in the same industry to achieve economies of scale or scope.

Early Supply Involvement

The practice of involving suppliers at the early stages of a product development process to leverage their expertise and insights for better outcomes.

Competitive Advantage

The unique attributes or circumstances that allow a company to produce goods or services better or more cheaply than its competitors.