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Given the following information for the two stocks

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Given the following information for the two stocks: Stock Expected Return Standard

Deviation Investment Beta  A  16%   3%  $30,000 1.2  B  15%   10%  $20,000 0.8 You construct a portfolio composing of stocks A and B according to the above information. Assume that the risk free rate is 6% and the market risk premium (MRP) is 9%. Use the CAPM analysis to numerically determine whether this 2stock portfolio is fairly priced? What is your investment recommendation on this portfolio? Why?

answer=<E(RP) = 15.6% vs Required (CAPM) RP = 15.36%>

Reference no: EM131757917

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