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Problem 12-6 Market Model The following three stocks are available in the market: ...

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Accounting

Problem 12-6 Market Model
The following three stocks are available in the market:
E(R)\beta
Stock A 11.5%1.24
Stock B 13.41.04
Stock C 15.91.44
Market 14.91
Assume the market model is valid.
a.
The return on the market is 15.7 percent and there are no unsystematic surprises in the returns. What is the return on each stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g.,32.16.)
b. Assume a portfolio has weights of 20 percent Stock A,35 percent Stock B, and 45 percent Stock C. The return on the market is 15.7 percent and there are no unsystematic surprises in the returns. What is the return on the portfolio?

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