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a. Your portfolio is invested 30 percent each in A and C, and 40 percent in B. What is the expected return of the portfolio?

b. What is the variance of this portfolio? The standard deviation? Calculating Portfolio Betas You own a stock portfolio invested 25 percent in Stock Q, 20 percent in Stock R, 15 percent in Stock S, and 40 percent in Stock T. The betas for these four stocks are .9, 1.4, 1.1, and 1.8, respectively. What is the portfolio beta?

Calculating Portfolio Betas You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of .8 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

V. Risk and Return

13. Return, Risk, and the Security Market Line

© The McGraw-Hill Companies, 2002

CHAPTER 13 Return, Risk, and the Security Market Line

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