Compute a fair rate of return for a common stock which has a 1.2 beta

Required rate of return using CAPM:

A. Compute a fair rate of return for a common stock which has a 1.2 beta. The risk free rate is 6% and the market portfolio has an expected return of 16%
B. Why is the rate computed considered a fair rate.

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You wish to calculate the risk level of your portfolio based on its beta

You wish to calculate the risk level of your portfolio based on its beta. The five stocks in the portfolio with their respective weights and betas are shown in the accompanying table. Calculate the beta of your portfolio.

Stock portfolio weight Beta
Alpha 20% 1.15
Centauri 10 0.85
Zen 15 1.60
Wren 20 1.35
Yukos 35 1.85


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