Question

Use a risk-free rate of 3% and a market return of 7%. You have a portfolio with $10,000 invested in Stock A with a beta of 0.9, $20,000 in Stock B with a beta of 1.8, and $20,000 in Stock C with a beta of 2.0. What is the beta and required return of the portfolio?

Answer #1

Given about a portfolio

Investment in stock A = $10000

Beta of stock A, Ba = 0.9

Investment in stock B = $20000

Beta of stock B, Bb = 1.8

Investment in stock C = $20000

Beta of stock C, Bc = 2.0

So, weight of stock A, Wa = investment in A/(investment in A + B + C) = 10000/(10000 + 20000 + 20000) = 20% or 0.20

Similarly weight of stock B, Wb = investment in B/(investment in A + B + C) = 20000/(10000 + 20000 + 20000) = 40% or 0.40

Similarly weight of stock C, Wc = investment in C/(investment in A + B + C) = 20000/(10000 + 20000 + 20000) = 40% or 0.40

So, beta of portfolio is weighted average beta of its assets

=> Beta of portfolio = Wa*Ba + Wb*Ba + Wc*Bc = 0.2*0.9 + 0.4*1.8 + 0.4*2 = 1.7

required return on portfolio is calculated using CAPM

Required return on portfolio = Rf + beta*(Rm - Rf)

Rf = 3%

Rm = 7%

Required return on portfolio = 3 + 1.7*(7-3) = 9.80%

Use a risk-free rate of 3% and a market return of 7%. You have a
portfolio with $10,000 invested in Stock A with a beta of 0.9,
$20,000 in Stock B with a beta of 1.8, and $20,000 in Stock C with
a beta of 2.0. What is the beta and required return of the
portfolio?

Assume the market risk is 8% and risk-free rate is 2%. You have
a portfolio with $15,000 invested in Stock A with a beta of 1.2,
$8,000 in Stock B with a beta of 1.8, and $12,000 in Stock C with a
beta of 2.0. What is the beta and expected return of the
portfolio?

The risk-free rate is 2% and the return on the market is 12%,
what is the required rate of return on the following portfolio?
Stock Amount Invested Beta A $6,000 0.6 B $9,000 1.8 C $5,000 1.2
15.71% 11.48% 13.16% 12.52% 14.90%

Use the following information for problems 3 through
10: The risk-free rate of return is 4%, the required rate
of return of the market portfolio is 10%. You invest $10,000 in
stock A, $15,000 in stock B, $50,000 in stock C, and $50,000 in
stock D. The average returns and standard deviations of the
individual stocks are as follows:
Ret
Standard Deviation
Beta
Stock A
0.25
0.31
2.0
Stock B
0.16
0.36
1.0
Stock C
0.04
0.17
0.8
Stock D...

7.You have a $1,000 portfolio which is invested in stocks A and
B plus a risk-free asset. $400 is invested in stock A. Stock A has
a beta of 1.3 and stock B has a beta of 0.7. You want a portfolio
beta of 0.9.
a.How much needs to be invested in stock B?
b.How much needs to be invested in the risk-free asset?

Use the following information for problems 3 through
10: The risk-free rate of return is 4%, the required rate
of return of the market portfolio is 10%. You invest $10,000 in
stock A, $15,000 in stock B, $50,000 in stock C, and $50,000 in
stock D. The average returns and standard deviations of the
individual stocks are as follows:
Ret
Standard Deviation
Beta
Stock A
0.25
0.31
2.0
Stock B
0.16
0.36
1.0
Stock C
0.04
0.17
0.8
Stock D...

A. You own a $20,000 portfolio that is invested in a risk-free
security and Stock A. The beta of Stock A is 1.60 and the portfolio
beta is 1.00. What is the amount of the investment in Stock A?
B. Stock A has a beta of 2.0 and an expected return of 13.0
percent. Stock B has a beta of 1.12 and an expected return of 13.70
percent. At what risk-free rate would these two stocks be correctly
priced?

You have a portfolio with $5,000 invested in Stock A with a beta
of 0.9, $8,000 in Stock B with a beta of 1.8, and $10,000 in Stock
C with a beta of 2.0. What is the beta and return of the portfolio?
A. beta = 1.78, Return = 9.80% B. beta = 1.69, Return = 12.15% C.
beta = 1.57, Return = 9.28% D. beta = 1.78, Return = 14.9%

3. If the risk-free rate is 6% and the expected return of the
market is 12%, what is the expected return of a portfolio that is
equally invested in
treasury bills and a stock with a beta of 1.3?
A. 9.9% B. 10.2% C. 13.8% D. 12.9% E. 19.8%
The answer is A. Please show the precess.

If the expected rate of return on the market portfolio is 14%
and the risk free rate is 6% find the beta for a portfolio that has
expected rate of return of 10%. What assumptions concerning this
portfolio and or market condition do you need to make to calculate
the portfolio’s beta? b. what percentage of this portfolio must an
individual put into the market portfolio in order to achieve an
expected return of 10%?

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