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Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock...

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Finance

Suppose that all stocks can be grouped into two mutually exclusive portfolios (with each stock appearing in only one portfolio): growth stocks and value stocks. Assume that these two portfolios are equal in size (market value), the correlation of their returns is equal to 0.6, and the portfolios have the following characteristics: Expected Return Volatility Value Stocks 0.12 14% Growth Stocks 0.15 24% The risk free rate is 3.5%. The expected return on the market portfolio (which is a 50-50 combination of the value and growth portfolios) is closest to: 15.0% 13.5% 19.0% 12.0%

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