Question

Suppose that a portfolio consists of the following stocks:

Stock		Amount		Beta
Chevron		$25,000		0.95
General Electric		60,000		1.20
Whirlpool		15,000		0.95

The risk-free rate (

) is 6 percent and the market risk premium ( ) is 4.2 percent.

1. Determine the beta for the portfolio. Round your answer to two decimal places.

2. Determine how much General Electric stock one must sell and reinvest in Chevron stock in order to reduce the beta of the portfolio to 1.00. Do not round intermediate calculations. Round your answer to the nearest dollar.
   $  

3. Determine the expected return on the portfolio in parts a and b. Do not round intermediate calculations. Round your answers to two decimal places.

   Expected Return (Original portfolio):  %

   Expected Return (Revised portfolio):  %

Answer 1