Question

Maya Moore owns a portfolio with 2 stocks: Jump Shot and Technical Foul. Information on these...

Maya Moore owns a portfolio with 2 stocks: Jump Shot and Technical Foul. Information on these stocks is presented in the table. The portfolio has a beta of 0.91. The expected return on the market is 12.17 percent, the market risk premium is 9.63 percent, and the risk-free rate is 2.54 percent. What is the beta of Jump Shot? Round your answer to 2 decimal places (for example, 2.89, 0.70, or 1.00).

Stock

Shares

Share price

Beta

Jump Shot

1,400

$25

?

Technical Foul

3,000

$31

0.72
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Homework Answers

Answer #1
Total Portfolio value = price of Jump shot*Shares of Jump shot + price of Technical foul*Shares of Technical foul
=25*1400+31*3000
=128000
Weight of Jump shot = price of Jump shot*Shares of Jump shot/Total Portfolio Value
= 35000/128000
=0.2734
Weight of Technical foul = price of Technical foul*Shares of Technical foul/Total Portfolio Value
= 93000/128000
=0.7266
Beta of Portfolio = Weight of Jump shot*Beta of Jump shot+Weight of Technical foul*Beta of Technical foul
0.91 = Beta of Jump shot*0.2734+0.72*0.7266
Beta of Jump shot = 1.42
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