EQ8 - c. If Intel has half the expected return of...

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EQ8. The expected return of the S&P 500, which you can assume is the tangency (Market) portfolio, is 16% and has a standard deviation of 25% per year. The expected return on Microsoft is unknown, but it has standard deviation of 20% per year and a covariance with S&P 500 of 0.10. If the risk-free rate is 6% per year, a. Compute Microsoft’s beta b. What is Microsoft’s expected return given the beta computed in part a.?
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Unformatted text preview: c. If Intel has half the expected return of Microsoft, then what is Intel’s beta? d. What is the beta of the following portfolio: 0.25 in Microsoft, 0.10 in Intel, 0.75 in the S&P500, -0.20 in GM (where β GM = 0.80), 0.10 in the risk-free asset. e. What is the expected return of the portfolio in part d.?...
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This note was uploaded on 11/09/2010 for the course FINC 2012 taught by Professor Andrew during the Three '10 term at University of Sydney.

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