Equally invested in the stock and the risk-free asset

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A stock has a beta of 1.2 and the standard deviation of its returns is 25%. The market risk premium is 5% and the risk-free rate is 4%. SHOW ALL WORK

a. What is the expected return for the stock?

b. What are the expected return and standard deviation for a portfolio that is equally invested in the stock and the risk-free asset?

c. A financial analyst forecasts a return of 12% for the stock. Would you buy it? Why or why not?

Reference no: EM131185785

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