The expected rate of return on the market portfolio is 9.75% and the risk–free rate of return is 1.75%. The standard deviation of the market portfolio is 19%. risk aversion = 2.22
I need the following question answered:
Stock A has a beta of 1.50 and a standard deviation of return of 35%. Stock B has a beta of 3.25 and a standard deviation of return of 60%. Assume that you form a portfolio that is 40% invested in Stock A and 60% invested in Stock B. Using the information in question 1, according to CAPM, what is the expected rate of return on your portfolio?