mary has a three-stock portfolio and is


Mary has a three-stock portfolio and is interested in calculating its overall return next year. She has $25,000 invested in Orange Corp., which has a beta of 1.3, $75,000 in Purple Corp. with a beta of .8 and $20,000 in Blue Corp, which has a beta of 1.45. The stock market is presently returning 10.2% and treasury securities are yielding the risk free rate of 4.6 percent. Evaluate what return should she expect anticipate on her portfolio? Determine the portfolio beta and then apply the SML.

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