What is the expected equilibrium return on portfolio

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Sarah owns a portfolio of stocks that have a market value of Rs. 50,000, and an estimated CAPM beta of 0.90.

(a) If the market risk premium is 9%, and the risk-free rate is 6%, what is the expected equilibrium return on this portfolio?

(b) If Sarah decides to sell one of her holdings that has a market value of Rs. 10,000 and a beta of 0.75, and invest the proceeds in another stock having a beta of 1.3, what is the new equilibrium expected return on her portfolio?

Reference no: EM132615854

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