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What return expect from portfolio based on individual stock

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Reference no: EM132534746

You are a portfolio manager of a $4 million fund consisting of the following stocks:
                                      

                                           Invested Amount              Beta            Expected Return

Bee-Bio-Tech Ltd.                $ 750,000                    1.90               12.5%

Iowe Bank Ltd.                      1,250,000                       0.75             6.75%

Electric Auto Ltd.                    2,000,000                          1.20              9.00%

  • Assure the risk-free rate is 3% and the market return is 8%

Question 1: What return should you expect from the portfolio, based on the individual stock's expected return?

Question 2: What return should you require from the portfolio, based on the individual stock's beta?

Question 3: You are considering another stock, Pacific Petroleum, which has a stock beta of 2.3. If Pacific Petroleum has an expected return of 14%, should you buy this stock? Why or why not?

Reference no: EM132534746

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