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The risk-free return is 5.0% and the market return is 12.7%. What is the expected return for the following portfolio? (State

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Answer #1

Beta of portfolio (Weighted beta) = sum of (weight * beta) of all security /Total weight      
      
Weights are investment      


Total weight is total investment that is = 400000+1000000+2200000+1800000      
=5400000      


Beta of portfolio= ((400000*3.8)+(1000000*2.8)+(2200000*1.7)+(1800000*1.0))/5400000      
=1.825925926      
      
Expected return of Portfolio as per CAPM model = Risk free rate +(Beta of Portfolio*(Market Expected Return - Risk free rate))      
=5%+(1.8259*(12.7%-5%))      
=19.06%      
      
      
So Expected return of portfolio is 19.06%      
      

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