An Investor Is Considering the Three Stocks Given Below Calculate the Expected Return and Beta of a Portfolio Equally

question 35

Essay

An investor is considering the three stocks given below:
$\begin{array}{llcc} \underline{ \text { Stock }} & \underline{\text { Expected} } &\underline{ \text { Beta}} \\ &\underline{\text { Return}} &&\\ \text {A } &6.0\%&-0.10\\ \text { B } &13.3\%&2.10\\ \text { C} &9.2\%&.75\\ \text { Market Portfolio } &10.0\%&1.00\\ \text { T-Bills } &7.0\%&0.00\\\end{array}$

Calculate the expected return and beta of a portfolio equally weighted between stocks B and C.Demonstrate that holding stock A actually reduces risk by comparing the risk of a portfolio equally weighted between stock B and T-Bills with a portfolio equally weighted between stocks B and A.

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