What return should you expect on your portfolio

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Question 1 - Suppose you hold a portfolio that consists of 35% in Microsoft Co. stock, 35% in Treasury bills, and 30% Apple Co. stock. Microsoft's beta is 1 and Apple's beta is 0.5. Treasury bills (the risk- free asset) offer a return of 4% and the expected return on the market is 11.5%. Required: As per the capital asset pricing model, what return should you expect on your portfolio?

Question 2 - You have $20,000 to invest in a stock portfolio. Your choices are Stock A, which has a beta of 2, and Stock B, which has a beta of 0.9. The risk-free rate is 3%, and the expected return on the market is 9%. Required: If your goal is to work a portfolio that has an expected return of 13.68%, how much money do you need to invest in Stocks A and B?

Reference no: EM132556920

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