Question

Use the following data to explore the risk-return relation and the concept of beta for Apple stock, Alphabet (Google) stock, and the S&P 500 market index:

Year |
Apple Stock Price |
Alphabet Stock Price |
S&P 500 Market Index |

2017 |
$174.09 |
$1,072.01 |
2,601.42 |

2016 |
$115.82 |
$807.80 |
2,238.83 |

2015 |
$105.26 |
$765.84 |
2,043.94 |

2014 |
$113.99 |
$521.51 |
2,058.90 |

2013 |
$80.01 |
$559.76 |
1,848.36 |

2012 |
$72.80 |
$358.17 |
1,426.19 |

Market risk premium: RP_{M} = |
4.01% |

Risk-free
rate: r_{RF} = |
1.30% |

- If you formed a portfolio that consisted of 50% Apple stock and 50% Alphabet stock, what would be its beta? (9 Points)

Beta | Portfolio Weight | |

Apple | ||

Alphabet | ||

Portfolio Beta |

***Please provide the Excel Functions

Answer #1

**SEE THE IMAGE. ANY DOUBTS,
FEEL FREE TO ASK. THUMBS UP PLEASE**

Use the following data to explore the risk-return relation and
the concept of beta for Apple stock, Alphabet (Google) stock, and
the S&P 500 market index:
Year
Apple Stock Price
Alphabet Stock Price
S&P 500 Market Index
2017
$174.09
$1,072.01
2,601.42
2016
$115.82
$807.80
2,238.83
2015
$105.26
$765.84
2,043.94
2014
$113.99
$521.51
2,058.90
2013
$80.01
$559.76
1,848.36
2012
$72.80
$358.17
1,426.19
Part 1: Risk and Beta
Make a scatter plot of stock returns (y-axis) against market
returns (x-axis) for both...

security
beta
Standard deviation
Expected return
S&P 500
1.0
20%
10%
Risk free security
0
0
4%
Stock d
( )
30%
13%
Stock e
0.8
15%
( )
Stock f
1.2
25%
( )
4) You form a complete portfolio by investing $8000 in S&P
500 and $2000 in the risk free security. Given the information
about S&P 500 and the risk free security on the table, figure
out expected return, standard deviation, and a beta for the
complete...

An investor wants to minimize market risk on a $50 million stock
portfolio by using futures for hedging. The portfolio’s beta with
respect to the S&P 500 equity index is 1.25. The current index
futures quote is 2,875 and each contract is for delivery of $250
times the index.
a. What futures position should the investor open to execute the
hedge? Long or short?
b. How many index futures contracts does the investor need to
use to minimize market risk?...

Excel Online Structured Activity: CAPM, portfolio risk, and
return
Consider the following information for three stocks, Stocks A,
B, and C. The returns on the three stocks are positively
correlated, but they are not perfectly correlated. (That is, each
of the correlation coefficients is between 0 and 1.)
Stock
Expected Return
Standard Deviation
Beta
A
8.70
%
16
%
0.8
B
10.30
16
1.2
C
11.50
16
1.5
Fund P has one-third of its funds invested in each of the...

Portfolio Risk and Return. Suppose that the S&P 500, with a
beta of 1.0, has an expected
return of 13% and T-bills provide a risk-free return of 4%.
(LO12-2)
a. What would be the expected return and beta of portfolios
constructed from these two assets
with weights in the S&P 500 of (i) 0; (ii) .25; (iii) .5; (iv)
.75; (v) 1.0?
b. On the basis of your answer to (a), what is the trade-off
between risk and return, that...

A fund manager has a portfolio worth $100 million with a beta of
0.88. the manager is concerned about the performance of the market
over the next 2 months and plans to use 3-month futurescontracts on
the S&P 500 to hedge the risk. The current level of the index
is 2600, one contract is on 250 times the index, the risk free rate
is 3% per annum, and the dividend yield on the index is 2% per
annum.
(a) Calculate...

A manager is holding a $1.25 million stock portfolio with a beta
of 1.17. She would like to hedge the risk of the portfolio using
the S&P 500 stock index futures contract. How many dollars’
worth of the index should she sell in the futures market to
minimize the volatility of her position? (Enter your answer
in dollar not in millions.)
Dollars worth of index to be sold?
Show your work with formulas in Excel

What is the LOWEST RISK based on the choices
below?
Buying ONE stock with a beta of 1.0
Buying two stocks in different industries that opposing
Betas
Buying 50 shares of FB with a beta of 1.3 and 50 shares of
Twitter with a Beta of .9
What is the LOWEST RISK based on the choices
below?
A 10 year U.S. Gov’t Bond.
Buying two stocks in different industries that opposing
Betas
An Index fund like the S&P 500

Which of the following Statements is most accurate?
The greater the number of stocks in a stock portfolio, the
harder it would be to outperform a market index like the S&P
500
The greater the number of stocks in a stock portfolio, the
higher the beta of the portfolio
The greater the number of stocks in a stock portfolio, the lower
the portfolio's systematic risk
The beta of a sock portfolio will increase any time that one or
more of...

A fund manager has a portfolio worth $50 million with a beta of
0.87. The manager is concerned about the performance of the market
over the next two months and plans to use three-month futures
contracts on the S&P 500 to hedge the risk. The current level
of the index is 1250, one contract is on 250 times the index. The
current 3-month futures price is 1259.
1) What position should the fund manager take to eliminate all
exposure to...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 19 minutes ago

asked 24 minutes ago

asked 40 minutes ago

asked 44 minutes ago

asked 44 minutes ago

asked 48 minutes ago

asked 48 minutes ago

asked 48 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago