Question

1. Your investment club has only two stocks in its portfolio. $30,000 is invested in a...

1. Your investment club has only two stocks in its portfolio. $30,000 is invested in a stock with a beta of 0.5, and $45,000 is invested in a stock with a beta of 1.8. What is the portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places.

2. AA Corporation's stock has a beta of 0.8. The risk-free rate is 3%, and the expected return on the market is 11%. What is the required rate of return on AA's stock? Do not round intermediate calculations. Round your answer to one decimal place.

3. Suppose that the risk-free rate is 4% and that the market risk premium is 6%. Round your answers to one decimal place.

  1. What is the required return on the market?

  %

  1. What is the required return on a stock with a beta of 1.0?

  %

  1. What is the required return on a stock with a beta of 1.3?.

  %

4. An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 8%, the return on the SMB portfolio (rSMB) is 2.4%, and the return on the HML portfolio (rHML) is 5.0%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's predicted return? Do not round intermediate calculations. Round your answer to two decimal places.

Homework Answers

Answer #1

In the fourth question the risk free rate is missing, Im posting remaining three and the formula for the fourth. Simply substitute them.

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