Question

You want to create a portfolio equally as risky as the market, and you have $1,400,000 to invest. Consider the following information: |

Asset | Investment | Beta |

Stock A | $420,000 | 0.90 |

Stock B | $420,000 | 1.15 |

Stock C | 1.45 | |

Risk-free asset | ||

Required: |

(a) |
What is the investment in Stock C? (Do not round your
intermediate calculations.) |

(Click to select)$356,855$353,138$371,724$386,593$241,879 |

(b) |
What is the investment in risk-free asset? (Do not
round your intermediate calculations.) |

(Click to select)$188,276$318,121$178,862$180,745$195,807 |

Answer #1

(A) Weight of stock C be X :

Total investment is $140,000 and the combined investment in A and B is $840,000

So, the remaining investment in asset C and risk free asset will be combined investment of $560,000

So, be investment in stock C is X ,

Investment in risk free asset = ($5,60,000 - X)

Portfolio beta should be 1 :

4,20,000/14,00,000 *0.9 + 4,20,000/14,00,000*1.15 + x/ 14,00,000 = 1

or, $37,8000 + 483,000 + 1.45 X = 14,00,000

So, X = $371724.1379

= X = $37,1724

Correct option is option C.

(B) Investment in risk free asset = ($5,60,000 - $371724.1379 = $188,275.8621

= $188,276

Correct option is option A .

You want to create a portfolio equally as risky as the market,
and you have $1,400,000 to invest. Given this information, fill in
the rest of the following table: (Leave no cells blank - be
certain to enter "0" wherever required. Do not
round intermediate calculations.)
Asset
Investment
Beta
Stock A
$196,000
1.10
Stock B
$350,000
1.40
Stock C
1.60
Risk-free asset
0

You want to create a portfolio equally as risky as the market,
and you have $1,200,000 to invest. Consider the following
information:
Asset
Investment
Beta
Stock A
$420,000
0.70
Stock B
$300,000
1.25
Stock C
1.40
Risk-free asset
Required:
(a)
What is the investment in Stock C? (Do not round your
intermediate calculations.)
(b)
What is the investment in risk-free asset? (Do not
round your intermediate calculations.)

You want to create a portfolio equally as risky as the market,
and you have $900,000 to invest. Consider the following
information:
Asset
Investment
Beta
Stock A
$180,000
0.90
Stock B
$180,000
1.10
Stock C
1.55
Risk-free asset
Required:
(a)
What is the investment in Stock
C? (Do not round your intermediate
calculations.)
(b)
What is the investment in
risk-free asset? (Do not round your intermediate
calculations.)

You want to create a
portfolio equally as risky as the market, and you have $1,000,000
to invest. Given this information, fill in the rest of the
following table: (Do not round intermediate calculations.
Round your answers to the nearest whole number, e.g.,
32.)
Asset
Investment
Beta
Stock A
$ 195,000
.90
Stock B
$ 340,000
1.15
Stock C
$
1.29
Risk-free asset
$

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and you have $500,000 to invest. Information about the possible
investments is given below: Asset Investment Beta Stock A $ 85,000
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will you invest in Stock C? (Do not round intermediate calculations
and round your answer to 2 decimal places, e.g., 32.16.) b. How
much will you invest in the risk-free asset? (Do not round...

You want to create a portfolio equally as risky as the market,
and you have $1,100,000 to invest. Consider the following
information:
Asset
Investment
Beta
Stock A
$330,000
0.70
Stock B
$220,000
1.25
Stock C
1.50
Risk-free asset
Required:
(a)
What is the investment in Stock C? (Do not round your
intermediate calculations.)
(b)What is the investment in risk-free asset?
(Do not round your intermediate calculations.)

You want to create a portfolio equally as risky as the market,
and you have $2,700,000 to invest. Given this information, fill in
the rest of the following table: (Do not round intermediate
calculations. Round your answers to the nearest whole number, e.g.,
32.)
Asset
Investment
Beta
Stock A
$ 459,000
1.00
Stock B
$ 783,000
1.40
Stock C
$
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Risk-free asset
$

You want to create a portfolio equally as risky as the market,
and you have $1,000,000 to invest. Given this information, fill in
the rest of the following table: (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g.,
32.16.)
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Stock A $165,000 0.80
Stock B $350,000 1.09
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Risk-Free Asset ? ?

You want to create a portfolio equally as risky as the market,
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Investment
Beta
Stock A
$200,000
0.90
Stock B
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1.30
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1.40
Risk-free asset
What is the investment in Stock C?
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You want to create a portfolio equally as risky as the market,
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Investment
Beta
Stock A
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0.70
Stock B
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1.55
Risk-free asset
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(a)
What is the investment in Stock C? (Do not round your
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B) $405,368
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(b)
What is the investment in risk-free asset? (Do not
round your intermediate calculations.)...

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