If the risk-free rate is 25 and the market return is 63, Financial Management

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If the risk-free rate is 25 and the market return is 63

Jeanne Lewis is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. She is particularly interested in using beta to compare the risk of the portfolios? and, in this? regard, has gathered the following? data:

Portfolio Weights

Asset Asset Beta Portfolio A Portfolio B

1 1.29 11% 26%

2 0.71 28% 14%

3 1.28 13% 25%

4 1.11 8% 25%

5 0.92 40% 10%

Total 100% 100%

a. Calculate the betas for portfolios A and B.

b. If the? risk-free rate is 2.5?% and the market return is 6.3%, calculate the required return for each portfolio using the CAPM.

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Financial Management: If the risk-free rate is 25 and the market return is 63

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