Consider two stocks, Coca-Cola Company (KO) and Pepsico, with
expected returns of 8% and 12% respectively. Assume that the stocks
have standard deviations of 12% and 14% respectively.

Never use plagiarized sources. Get Your Original Essay on
Question: Consider two stocks, Coca-Cola Company (KO) and Pepsico, with expected returns of 8% and 12% resp…
Hire Professionals Just from $11/Page
Order Now Click here

(my personal calculations after finding the weights of KO and
PEP in a portfolio with a -1 correlation): the expected return on
this portfolio is E(return_portfolio) = W*E(return_KO) +
(1-W)*E(return_PEP) = 0.0981 or 9.81%

IF THE MARKETS ARE EFFICIENT, WHAT MUST THE RISK-FREE
RATE BE IN THIS ECONOMY? (I’m assuming this refers to the
CAPM pricing model and I have to calculate beta first, but I don’t
know how) – PLEASE SHOW YOUR WORK

Open chat
Lets chat on via WhatsApp
Hello, Welcome to our WhatsApp support. Reply to this message to start a chat.