I apologize if similar question has already been asked.
I have to calculate expected return on the stocks A & B via CAPM.
I know $w_A = 0.2$ & $w_B = 0.8$ (weights computed from given prices and quantities)
$β_A = 1.2$. I have calculated also $β_B = 0.95$ using above data.
Now, the task is to solve this equation:
$E(r_A,_B = r_F + β_A,_B(r_M - r_F)$
I think I can find $ρ$ (that I need for the covariance) from formula for $β_A$, and I get two solutions: $ρ_1 = 1.88$ & $ρ_2 = -1.13$
I don't know which is the right one, besides I can't find $r_F$ & $r_M$ so I'm stuck here.
