Question

You have been managing a $5 million portfolio that has a beta of 1.15 and a required rate of return of 8.025%. The current risk-free rate is 4%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.95, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.

Answer #1

Rf = Risk free rate = 4%

Beta = 1.15

Required return = 8.025%

Market Risk Premium = (Requied return - Risk free rate) / Beta

= (8.025% - 4%) / 1.15

= 4.025% / 1.15

= 3.5%

WA = Weight of Portfolio = $5,000,000 / $5,500,000 = 0.9090909

WB = Weight of new stock = $500,000 / $5,500,000 = 0.0909090

BA = Beta of Portfolio = 1.15

BB = Beta of new stock = 0.95

New Beta with stock = [WA * BA] + {WB * BB]

= [0.9090909 * 1.15] + [0.0909090 * 0.95]

= 1.04545454 + 0.08636355

= 1.13181809

Required return on $5.5 million portfolio = Rf + (New beta * Market Risk premium)

= 4% + (1.13181809 * 3.5%)

= 4% + 3.96136332%

= 7.96136332%

Therefore, Required return on $5.5 million portfolio is 7.96%

You have been managing a $5 million portfolio that has a beta of
1.15 and a required rate of return of 10%. The current risk-free
rate is 6.50%. Assume that you receive another $500,000. If you
invest the money in a stock with a beta of 1.15, what will be the
required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.

You have been managing a $5 million portfolio that has a beta of
0.95 and a required rate of return of 12%. The current risk-free
rate is 7.50%. Assume that you receive another $500,000. If you
invest the money in a stock with a beta of 1.15, what will be the
required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.

You have been managing a $5 million portfolio that has a beta of
0.85 and a required rate of return of 6.825%. The current risk-free
rate is 3%. Assume that you receive another $500,000. If you invest
the money in a stock with a beta of 1.15, what will be the required
return on your $5.5 million portfolio? Do not round intermediate
calculations. Round your answer to two decimal places.

You have been managing a $5 million portfolio that has a beta of
0.95 and a required rate of return of 12.125%. The current
risk-free rate is 5%. Assume that you receive another $500,000. If
you invest the money in a stock with a beta of 1.25, what will be
the required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.

You have been managing a $5 million portfolio that has a beta of
0.95 and a required rate of return of 11.175%. The current
risk-free rate is 5%. Assume that you receive another $500,000. If
you invest the money in a stock with a beta of 1.25, what will be
the required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.

You have been managing a $5 million portfolio that has a beta of
1.25 and a required rate of return of 14.625%. The current
risk-free rate is 4%. Assume that you receive another $500,000. If
you invest the money in a stock with a beta of 1.45, what will be
the required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.
%

You have been managing a $5 million portfolio that has a beta of
1.55 and a required rate of return of 10%. The current risk-free
rate is 7.25%. Assume that you receive another $500,000. If you
invest the money in a stock with a beta of 0.85, what will be the
required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal places.
%

You have been managing a $5 million portfolio that has a beta of
1.05 and a required rate of return of 8.675%. The current risk-free
rate is 5%. Assume that you receive another $500,000. If you invest
the money in a stock with a beta of 1.35, what will be the required
return on your $5.5 million portfolio? Do not round intermediate
calculations. Round your answer to two decimal places.

You have been managing a $5 million portfolio that has a beta of
1.30 and a required rate of return of 15%. The current risk-free
rate is 6.50%. Assume that you receive another $500,000. If you
invest the money in a stock with a beta of 0.70, what will be the
required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.
%

You have been managing a $5 million portfolio that has a beta of
1.80 and a required rate of return of 14.415%. The current
risk-free rate is 5%. Assume that you receive another $500,000. If
you invest the money in a stock with a beta of 1.00, what will be
the required return on your $5.5 million portfolio? Do not round
intermediate calculations. Round your answer to two decimal
places.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 4 minutes ago

asked 7 minutes ago

asked 20 minutes ago

asked 26 minutes ago

asked 28 minutes ago

asked 29 minutes ago

asked 33 minutes ago

asked 35 minutes ago

asked 35 minutes ago

asked 44 minutes ago

asked 51 minutes ago