Compute betas for stocks

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Consider the following two stocks A and B. The riskfree rate is 5%, the expected return on the market is 12% and the variance of the market return is 0.01.

                        Corr with market         Standard deviation

Stock A                                   0.5                               0.25  

Stock B                                   0.3                               0.30

a) Compute betas for stocks A and B and for an equally weighted portfolio of A and B

b) If this equally weighted portfolio has an expected return of 14%, should you buy it?

Reference no: EM131596486

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