Explore BrainMass

Explore BrainMass

    Capital-asset-pricing model

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Suppose you have invested $50,000 in the following four stocks:

    Security Amount Invested Beta
    Stock A $10,000 0.7
    Stock B 15,000 1.2
    Stock C 12,000 1.4
    Stock D 13,000 1.9

    The risk-free rate is 5 percent and the expected return on the market portfolio is 18 percent.

    Based on the capital-asset-pricing model, what is the expected return on the above
    portfolio?

    © BrainMass Inc. brainmass.com June 3, 2020, 6:36 pm ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/capital-asset-pricing-model-67149

    Solution Preview

    Amount Beta Proportion Product
    $10,000 0.7 0.2 0.14
    $15,000 1.2 0.3 0.36
    $12,000 ...

    Solution Summary

    This discusses the capital-asset-pricing model and calcualtion of cost of equity

    $2.19

    ADVERTISEMENT