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What is the expected return of lemon company shares

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Question - At the beginning of 2021 Lemon Company has a share price of $3.00, and a beta of 2, whereas Lime Company shares have a beta of 1.5 and a share price of $4.80. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, according to the capital asset pricing model:

(a) What is the expected return of Lemon Company shares?

(b) What is the expected return of Lime Company shares?

(c) What is the beta of a portfolio that consists of 40% Lemon Shares and 60% Lime shares?

(d) What is the expected return of a portfolio that consists of 40% Lemon Shares and 60% Lime shares?

Reference no: EM133059487

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