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  3. 6. you will invest in three stocks with the follow

6. You will invest in three stocks with the following individual Betas and Expected returns:...

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6. You will invest in three stocks with the following individual Betas and Expected returns: Beta E(Return) w $10,000 0.8 0.075 x $12,000 0.9 0.09 z $11,000 1.5 0.105 a. Estimate the Portfolio Beta. (Remember you have to get the weights first) , - , . b. Assume that the Risk Free return is 3% and the Expected Market Return is 8%. Estimate the CAPM returns for each stock. Find out if the expected return of each asset is overpriced, underpriced or if it is fair value. CAPM Formula E(R) = R + [E(R) - RB R, = 3% E(RM) = 8%

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