The following portfolio has an expected return of _____ percent and a beta of _____.
Security | Amount Invested |
Expected Return |
Beta |
X | $17,000 | 14.2% | 0.98 |
Y | $12,000 | 7.8 | 1.33 |
Z | $11,000 | 9.5 | 1.07 |
Multiple Choice
11.03; 1.28
11.16; 1.11
10.53; 1.13
11.11; 1.16
10.99; 1.11
total fund value = value of X + value of Y + value of Z = 17000+12000+11000=40000
Weight of X = value of X/ total fund value = 17000/40000
Weight of Y = value of X/ total fund value = 12000/40000
Weight of Z = value of X/ total fund value = 11000/40000
Expected fund return = Weight of X*return of X+ Weight of Y*return of Y+ Weight of Z*return of Z
=17000/40000*14.2+12000/40000*7.8+11000/40000*9.5
=10.9875
Fund beta = Weight of X*Beta of X+ Weight of Y*Beta of Y+ Weight of Z*Beta of Z
=17000/40000*0.98+12000/40000*1.33+11000/40000*1.07
=1.10975
10.99; 1.11 is correct
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