Question

. You hold a portfolio with the following securities          Security         Weight    Beta        Expected Return XXX...

. You hold a portfolio with the following securities

         Security         Weight    Beta        Expected Return

XXX Corporation     20%        2.20         25.0%

YYY Corporation     30%       1.90         22.0%

ZZZ Corporation       25%.       0.40         16.0%

FFF Corporation       25%        0.70        17.0%

What are the expected return and Beta for the portfolio respectively?

A)19.85%and1.244

B)19.85%and1.285

C23.54%and1.244

D)28.59%and1.285

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Answer #1

Answer: Option B: 19.85% and 1.285

Expected Return = Wx*Rx+Wy*Ry+Wz*Rz+Wf*Rf

Wx=Weight of XXX

Wy=Weight of YYY

Wz=Weight of ZZZ

Wf=Weight of FFF

Rx= Expected return for XXX

Ry= Expected return for YYY

Rz= Expected return for ZZZ

Rf= Expected return for FFF

Expected Return =20%*25% + 30%*22% + 25%*16%+25%*17% = 19.85%

Beta For Portfolio = Wx*Bx+Wy*By+Wz*Bz+Wf*Bf

Wx=Weight of XXX

Wy=Weight of YYY

Wz=Weight of ZZZ

Wf=Weight of FFF

Bx= Beta for XXX

By= Beta for YYY

Bz= Beta for ZZZ

Bf= Beta for FFF

Beta For Portfolio =20%*2.2+30%*1.9+25%*0.4+25%*0.7=1.285

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