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SML, Expected Return, Beta

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5) The rate on Treasury bills is 4 percent, and the equity risk premium is 10 percent. Use the SML to estimate the return on each of the above stocks.
Security Standard deviation Correlation with market

A 0.30 0.70
B 0.75 0.30
C 0.45 0.50
D 0.50 0.16

6) Maria has decided to invest $5,000 in each of the above stocks. Compute the expected return on the portfolio and the portfolio beta.

Security Standard deviation Correlation with market

A 0.30 0.70
B 0.75 0.30
C 0.45 0.50
D 0.50 0.16

(See attached file for full problem description with data charts)

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Solution Summary

Calculates the return on stocks using security market line (SML) and calculates the expected return on the portfolio and the portfolio beta for a portfolio made up of these stocks.

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