Author Question: Stock X has a beta of 1.2 and Stock Y has a beta of 0.8. The standard deviation of each stocks ... (Read 62 times)

olgamartinez04 · **on:** Aug 7, 2023

Stock X has a beta of 1.2 and Stock Y has a beta of 0.8. The standard deviation of each stock’s returns is 19%. The stocks’ returns are independent of each other; that is, the correlation coefficient between them is zero. Portfolio P consists of 50% X and 50% Y. Given this information, which of the following statements is correct?

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Portfolio P has the same required return as the market (r_M).

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Portfolio P has a beta of 0.8.

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Portfolio P has a beta of 1.0 and a required return that is equal to the riskless rate, r_RF.

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The required return on Portfolio P is equal to the market risk premium (r_M– r_RF).

bainer89 · **Reply #1 on:** Aug 7, 2023

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