A Stock Has a Beta of 1

question 22

Multiple Choice

A stock has a beta of 1.24,an expected return of 13.68 per cent,and lies on the security market line.A risk-free asset is yielding 2.8 per cent.You want to create a $6,000 portfolio consisting of Stock A and the risk-free security such that the portfolio beta is 0.65.What rate of return should you expect to earn on your portfolio?

• A)9.56 per cent
• B)8.50 per cent
• C)9.16 per cent
• D)9.33 per cent
• E)9.41 per cent

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