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Nelson's portfolio is made up of A and B with characteristics as shown on the following table. The portfolio has 40% in A and the rest in B. The risk free rate is 2.5%.
Investment Return beta alpha
A 4.o% 1.20 -0.5%
B 7.0% 1.50 0.4%
What is the return on Nelson's portfolio?
What is the beta of Nelson's portfolio?
What is the alpha of Nelson's portfolio?
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