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What would be the expected return and beta of a portfolio

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Reference no: EM132764143

You are given the following information on five stocks:

                                     Expected Return         Beta

Five star properties         8%.                    0.8

Royal paper products      14%.                   1.6

Fairway golf products.      10%.                 1.4

SPEC Engineering            14%.                 2.0

Diamond Technology.         11%.               1.2

Problem a. Which stocks are (a) undervalued, (b) overvalued, and (c) correctly valued?

Problem b. What would be the expected return and beta of a portfolio made up of only the stocks that are correctly valued and undervalued? Assume that each stock in the portfolio has an equal weighting.

Reference no: EM132764143

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