Question

You hold the positions in the table below. Price Shares Beta Advanced Micro Devices $ 14.70 300 4.2 FedEx Corp. 120.00 50 1.1 Microsoft 28.90 100 0.7 Sara Lee Corp. 17.25 150 0.5 What is the beta of your portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.) If you expect the market to earn 12 percent and the risk-free rate is 3.5 percent, what is the required return of the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

The  beta of portfolio = 1.79

Note :

Company	Price	Shares	Value( Price * Shares)	Weight ( Value / Total Value)	Beta	Weight * Beta
Advanced Micro Devices	14.7	300	4,410	0.28	4.20	1.17
FedEx Corp	120	50	6,000	0.38	1.10	0.42
Microsoft	28.9	100	2,890	0.18	0.70	0.13
Sara Lee Corp	17.25	150	2,588	0.16	0.50	0.08
			15,888			1.79

Required Return on portfolio = Risk Free rate + ( Return on Market - Risk Free rate ) * Beta

= 3.5 % + ( 12% - 3.5%) * 1.79

= 18.715%

= 18.72%

Hence the correct answer is 18.72%