1a. John has $35,000 to invest. He puts $20,000 in Apples Stock and the remaining...
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1a. John has $35,000 to invest. He puts $20,000 in Apples Stock and the remaining in Amazons stock. The expected return of Apple is 30 percent and that of Amazon is 22.5 percent. What is the expected return of the portfolio?
1b. Suppose the risk-free rate is 8.5 percent. The expected return of the market is 16.5 percent. If Apple has a beta of 0.8, what is its expected return based on Capital Asset Pricing Model (CAPM)? If Amazon has an expected return of 25 percent, what must its beta be?
1c. Say Apple now has a beta of 1.45 and the risk-free rate is 6.3 percent. The market risk premium is 9 percent. What is its expected rate of return?
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