The table below gives the amount invested and betas for three stocks.

Stock       Amount Invested          Beta

GM            K10, 000                     1.2

IBM           K10, 000                     1.0

WMT         K20, 000                     0.7

 

REQUIRED:

  1. Using the CAPM, if the expected return for the market is 6% and the risk-free rate is 1.5%, what is the expected return for each stock?
  2. What is the beta for this portfolio based on the invested amounts?
  3. Using the CAPM, what is the expected return for this portfolio?
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