Suppose that Google Stock has a beta of 1.06 and Boeing stock has a beta of 1.31.If the risk-free interest rate is 4% and the expected return from the market portfolio is 12%,then the expected return on a portfolio that consists of 30% Google stock and 70% Boeing stock is closest to:
A) 12.5%
B) 13.1%
C) 13.5%
D) 13.9%

Question

Quizplus · Accepted Answer

D) β_port = 11ea7e60_15b4_9e4a_ba34_756071ee6a98_TB1624_11 = (.30)1.06 + (.70)1.31 = 1.2350 r_i = r_f + β_i(R_m - r_f) = .04 + 1.235(.12 - .04) = .1388 or 13.88%

Suppose That Google Stock Has a Beta of 1