# Risk-free rate- expected rate of return for stocks

You are considering investing in a portfolio of the common stocks of four publicly-traded companies with betas as follows:

ABC - 0.7

DEF - 0.9

GHI - 1.3

JKL - 1.9

If the risk-free rate is 4.5% and the market rate is 8.5%, what is your expected rate of return of following stocks :

a. ABC?

b. DEF?

c. GHI?

d. JKL?

e. If your portfolio is 20% in ABC, 30% in DEF, 30% in GHI, and 20% in JKL, what is your portfolio (weighted average) expected rate of return?

https://brainmass.com/business/accounting/256780

#### Solution Preview

You are considering investing in a portfolio of the common stocks of four publicly-traded companies with betas as follows:

ABC: 0.7

DEF: 0.9

GHI: 1.3

JKL: 1.9 ...

#### Solution Summary

The solution examines risk-free rates and the expected rate of return for stocks.

$2.19