What is the required return for a portfolio

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Question - You are considering the following four stocks for investment, A, B, C and D. You have analyzed them and come up with the following information. β Expected return A 1.1 10.2% B 0.9 10.1% C 1.3 11.8% D 1.2 11.4% Market - 10.0% Risk-free rate - 4.0% Assuming your analysis is valid:

(i) Please determine for each of the stocks whether they are under or overvalued.

(ii) Which stock is riskiest? Why?

(iii) What is the required return for a portfolio of all four stocks comprising A (20%), B (25%), C (35%) and D (20%)?

(iv) What is the expected return for an equal-weighted portfolio of only the undervalued stocks?

Reference no: EM132621857

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