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# Beta Question Valuing portfolio HELP! Watch

1. 14. Mr Smith is considering an investment in a portfolio. The portfolio is being advertised by a leading financial investment house as having a beta of 1.4. What is the expected return of this portfolio if the current interest rate on government bonds is 4.75% and the expected return on the market is 11.25%?

A. 6.65%
B. 9.1%
C. 13.85%
D. 15.75%
E. 20.5%

2. (Original post by Tony_Soprano1)
14. Mr Smith is considering an investment in a portfolio. The portfolio is being advertised by a leading financial investment house as having a beta of 1.4. What is the expected return of this portfolio if the current interest rate on government bonds is 4.75% and the expected return on the market is 11.25%?

A. 6.65%
B. 9.1%
C. 13.85%
D. 15.75%
E. 20.5%

Let x % the expected return, then with beta=1.4 for portfolio
x=4.75+1.4(11.25-4.75)

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Updated: December 21, 2010
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