Question

Your portfolio has a beta of 1.05. The portfolio consists of 30 percent Treasury bills, 50...

Your portfolio has a beta of 1.05. The portfolio consists of 30 percent Treasury bills, 50 percent stock A, and 20 percent stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of stock B?
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Portfolio beta is the weighted average beta of stocks in a portfolio.
Now,
Treasury bills normally considered as Risk Free Assets and beta
of a Risk Free Asset is 0.
Stock A has a risk level equivalent to that of the overall market and
Beta of a market portfolio is always 1, so beta of Stock A is also 1.
Portfolio Beta
= Weight of Stock A * Beta of Stock A + Weight of Stock B * Beta of Stock B
+ Weight of Treasury Bills * Beta of Treasury Bills
1.05 = 50% * 1 + 20%*Beta of Stock B + 30%*0
1.05 = 0.5 + 0.20*Beta of Stock B + 0
0.20 * Beta of Stock B = 1.05 - 0.5
0.20 * Beta of Stock B = 0.55
Beta of Stock B = 0.55/0.20
Beta of Stock B = 2.75
So,
Beta of Stock B = 2.75
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Your portfolio has a beta of 1.17. The portfolio consists of 14 percent U.S. Treasury bills,...
Your portfolio has a beta of 1.17. The portfolio consists of 14 percent U.S. Treasury bills, 31 percent in stock A, and 55 percent in stock B. Stock A has a risk-level equivalent to that of the overall market. What is the beta of stock B?
You would like to combine a risky stock with a beta of 0.71 with U.S. Treasury...
You would like to combine a risky stock with a beta of 0.71 with U.S. Treasury bills (risk free asset) in such a way that the risk level of the portfolio is equivalent to the risk level of the overall market. What percentage of the portfolio should be invested in the risky stock? Only Enter the Final Answer in Decimals. Select one of the following: 0.478 1.408 0.61 1.136 1.639
you would like to create a portfolio that is equally invested in treasury bills and three...
you would like to create a portfolio that is equally invested in treasury bills and three stocks. one stock has a beta of 1.04 the second stock has a beta of 1.68 what does the better of the third stock have to be if you want the portfolio to have a beta 15% greater than the overall market show all work
A portfolio consists of the following: $4,000 of stock A with beta of 1.2, $3,000 of...
A portfolio consists of the following: $4,000 of stock A with beta of 1.2, $3,000 of stock B with beta of 1.41, and $8,000 of U.S. Treasury bills. What is the portfolio beta? Please show all formulas.
Your portfolio consists of $66,347 invested in a stock that has a beta = 0.9, $59,537...
Your portfolio consists of $66,347 invested in a stock that has a beta = 0.9, $59,537 invested in a stock that has a beta = 1.2, and $31,210 invested in a stock that has a beta = 2. The risk-free rate is 3.2%. Last year this portfolio had a required return of 14.9%. This year nothing has changed except that the market risk premium has increased by 2.6%. What is the portfolio’s current required rate of return?
A company you are researching has common stock with a beta of 1.35. Currently, Treasury bills...
A company you are researching has common stock with a beta of 1.35. Currently, Treasury bills yield 4%, and the market portfolio offers an expected return of 13%. The company finances 20% of its assets with debt that has a yield to maturity of 6%. The firm also uses preferred stock to finance 30% of its assets. The preferred stock has a current price of $10 per share and pays a level $1.00 dividend. The firm is in the 35%...
An investor divides her portfolio into four parts, with 1/3 in Treasury bills, 1/3 in a...
An investor divides her portfolio into four parts, with 1/3 in Treasury bills, 1/3 in a market index, 1/3 in an asset with beta of 1.5. What is the beta of the investor's overall portfolio? Please show work
You want your portfolio beta to be 1.30. Currently, your portfolio consists of $100 invested in...
You want your portfolio beta to be 1.30. Currently, your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of .6. You have another $400 to invest and want to divide it between an asset with a beta of 1.8 and a risk-free asset. How much should you invest in the risk-free asset?
An investor divides her portfolio into three equal parts, with one part in Treasury bills, one...
An investor divides her portfolio into three equal parts, with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 1.50. What is the beta of the investor's overall portfolio? Please show work with formulas. Hint: Beta of a portfolio is the weighted average of individual assets' betas.
You have been managing a $5 million portfolio that has a beta of 1.05 and a...
You have been managing a $5 million portfolio that has a beta of 1.05 and a required rate of return of 8.675%. The current risk-free rate is 5%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.35, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT