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What is the expected return on lucy portfolio

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Reference no: EM133495905

Tasman Co. has a beta of 0.9, and an expected return of 15%. Macquarie Co. has a beta of 1.2 and an expected return of 16%. Lucy plans to invest in both stocks.

1. If risk-free rate is 2.5%, and Lucy are spreading her money equally on both stocks, what is the expected return on Lucy's portfolio?

2. If a portfolio of the two assets has a beta of 0.95, what are the portfolio weights?

3. If Lucy includes one more risk-free asset into her existing portfolio in part (b), and this new portfolio has a beta of 1.3. what are the portfolio weights? How do we interpret the weight for the risk-free asset?

Reference no: EM133495905

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