SOLUTION: Stock A has an expected return of 10 percent and a beta of 1.0. Stock B has a beta of 2.0. Portfolio P is a two-stock portfolio, where part of the portfolio is invested in Stock A
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Question 1163011: Stock A has an expected return of 10 percent and a beta of 1.0. Stock B has a beta of 2.0. Portfolio P is a two-stock portfolio, where part of the portfolio is invested in Stock A and the other part is invested in Stock B. Assume that the risk-free rate is 5 percent, that required returns are determined by the CAPM, and that the market is in equilibrium so that expected returns equal required returns. Portfolio P has an expected return of 12 percent. What proportion of Portfolio P consists of Stock B? Answer by ikleyn(52803) (Show Source):
