Compute the expected return of your portfolio

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Question - You have a portfolio that consists of 35% Microsoft stock, 35% Amazon stock, and 30% GE stock. Microsoft has a beta of 1, Amazon has a beta of 3.0, and GE has a beta of 0.5. Treasury bills (the risk free asset) currently offer a return of 4%, and the expected return on the market is 11.5%.

a. Use the CAPM to estimate the expected return of each stock.

b. What is the beta of your portfolio?

c. Compute the expected return of your portfolio using the CAPM equation and the portfolio beta from part b.

d. Compute the expected return of your portfolio by taking the weighted average of the individual stocks' expected returns.

Reference no: EM132967401

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