You hold a portfolio of three stocks with the following investments and individual betas.
Stock A $20,000; beta of 1.75
Stock B $40,000; beta of 0.90
Stock C $25,000; beta of 1.55
a) What is the portfolio beta? HINT: Get a weighted average of the three betas. Show all work.
b) If the current risk-free rate of return is 3.5% and the return on an average risk security, r(m), is 6%, what is the required rate of return on the portfolio? Use the portfolio beta found in part a. Show all work.