Question

You hold the positions in the table below. COMPANY PRICE # SHARES BETA Goodmonth $30.00 400...

You hold the positions in the table below.

COMPANY PRICE # SHARES BETA

Goodmonth $30.00 400 + 3.0

Icestone $20.00 250 – 4.0

Bridgerock $50.00 440 + 2.0 A.

What is the beta of your portfolio? Beta

B. If you expect the market to earn 17% and the risk-free rate is 2%, based on it’s beta, what is the expected return of the portfolio?

Expected Portfolio Return %

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Answer #1
A
Stock Price Shares Amount Weights Beta Portfolio beta
Good month 30 400 12000 0.31 3 0.93
Icestone 20 250 5000 0.13 -4 -0.52
Bridgeroom 50 440 22000 0.56 2 1.12
Total 39000 1 1.53
Portfolio beta = 1.53
B.
Market return = 17%
Risk Ffree r ate = 2%
Beta = 1.53
Portfolio returnr = Risk free rate + Beta *(Market rrate - Risk free rate)
2% + 1.53 * (17-2)% =   24.95%
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