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QUESTION
An investor currently has all of his wealth in Treasury bills. He is considering investing one-third of his funds in General Electric, whose beta is...
An investor currently has all of his wealth in Treasury bills. He is considering investingone-third of his funds in General Electric, whose beta is 1.30, with the remainderleft in Treasury bills. The expected risk-free rate (Treasury bills) is 6 percent and themarket risk premium is 8.8 percent. Determine the beta and the expected return onthe proposed portfolio.
SOLUTION:Expected Return from General Electric = Rf + Beta * Market Risk PremiumExpected Return from General Electric = 6% + 1.30 * 8.8%Expected Return from General Electric 17.44% Beta of...