Problem:
You own a $210,000 portfolio that is invested in stock A and B. The portfolio beta is equal to the market beta. Stock A has an expected return of 18.7 percent and has a beta of 1.42. Stock B has a beta of 0.88.
Required:
Question: What is the value of your investment in stock A?
A) $38,600
B) $42,333
C) $44,500
D) $46,667
E) $47,200
Note: Provide support for rationale.