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Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1 1.32 15 32 2 0.73...

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image Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1 1.32 15 32 2 0.73 32 12 3 1.22 9 21 4 1.06 5 20 5 0.89 39 15 Total 100 100

Jason Jackson is attempting to evaluate 2 possible portfolios consisting of the same 5 assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data: a. Calculate the betas for portfolios A and B. b. If the risk-free rate is 2.8% and the market return is 6.4%, calculate the required return for each portfolio using the CAPM. c. Then assume you believe that each of the five assets will earn the return (rj) shown in this table: . Based on these figures and the weights, what returns do you believe that Portfolios A and B will earn? Which portfolio you would invest in and why? a. The beta of portfolio A is . (Round to three decimal places.)

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