Question

Your portfolio consists of $66,347 invested in a stock that has a beta = 0.9, $59,537 invested in a stock that has a beta = 1.2, and $31,210 invested in a stock that has a beta = 2. The risk-free rate is 3.2%. Last year this portfolio had a required return of 14.9%. This year nothing has changed except that the market risk premium has increased by 2.6%. What is the portfolio’s current required rate of return?

Answer #1

Stock X has a 10% expected return, a beta coefficient of 0.9,
and a 35% standard deviation of expected returns. Stock Y has a
12.5% expected return, a beta coefficient of 1.2, and a 25%
standard deviation. The risk-free rate is 6%, and the market risk
premium is 5%.
a. Calculate each stock’s coefficient of variation.
b. Which stock is riskier for a diversified investor?
c. Calculate each stock’s required rate of return.
d. On the basis of the two...

Stock X has a 10% expected return, a beta coefficient of 0.9,
and a 35% standard deviation of expected returns. Stock Y has a
12.5% expected return, a beta coefficient of 1.2, and a 25%
standard deviation. The risk-free rate is 6%, and the market risk
premium is 5%.
a. Calculate each stock’s coefficient of variation.
b. Which stock is riskier for a diversified investor?
c. Calculate each stock’s required rate of return.
d. On the basis of the two...

You have a portfolio with $5,000 invested in Stock A with a beta
of 0.9, $8,000 in Stock B with a beta of 1.8, and $10,000 in Stock
C with a beta of 2.0. What is the beta and return of the portfolio?
A. beta = 1.78, Return = 9.80% B. beta = 1.69, Return = 12.15% C.
beta = 1.57, Return = 9.28% D. beta = 1.78, Return = 14.9%

Given the following probability distribution, what are the
expected return and the standard
deviation of returns for Security J?
State Pi rj
1 0.2 12%
2 0.3 4%
3 0.5 17%
Group of answer choices
12.10%; 5.93%
12.30%; 5.63%
12.40%; 5.63%
12.30%; 5.93%
12.10%; 5.63%
Suppose you hold a diversified portfolio consisting of a $6,485
invested equally
in each of 20 different common stocks. The
portfolio’s beta is 0.81. Now
suppose you decided to sell one of your stocks that has a beta
of 1.4 and to
use the proceeds...

A portfolio has the following stocks:
Stock
Amount Invested
Stock's Beta
A
$2,000
1.4
B
$8,000
1.2
C
$15,000
1.6
Suppose that the risk-free rate of return is 4% and the market
return is 20%.
(1) What are the weights for Stocks A, B and C, respectively?
(
2) What is the portfolio’s beta?
(3) What is the expected return for Stock A?
(4) What is the expected return for the portfolio?

Suppose SNAP stock has a beta of 1.71, whereas Walmart stock
has a beta of 0.9. If the risk-free interest rate is 5.5% and the
expected return of the market portfolio is 10.7%,according to the
CAPM,
a. What is the expected return of SNAP stock?
b. What is the expected return of Walmart stock?
c.What is the beta of a portfolio valued at $1 million that
consists of $550,000 in 60% SNAP stock and $450,000 invested in
40% Walmart stock?...

Consider a $10 million portfolio that consists of the following
five stocks:
Stock
$Amount Invested
Beta
A
4 million
1.7
B
2 million
1.1
C
2 million
1.0
D
1 million
0.7
E
1 million
0.5
What is the required return on this portfolio if the risk free
rate of return is 5.9% and the market risk premium is 5%?

You want your portfolio beta to be 1.30. Currently, your
portfolio consists of $100 invested in stock A with a beta of 1.4
and $300 in stock B with a beta of .6. You have another $400 to
invest and want to divide it between an asset with a beta of 1.8
and a risk-free asset. How much should you invest in the risk-free
asset?

Suppose you have a portfolio that has $100 in stock A with a
beta of 0.9, $400 in stock B with a beta of 1.2, and $300 in the
risk-free asset. You have another $200 to invest. You wish to
achieve a beta for your whole portfolio to be the same as the
market beta. What is the beta of the added security? Give an
example of a firm that may have such a beta.

1. Your investment club has only two stocks in its portfolio.
$30,000 is invested in a stock with a beta of 0.5, and $45,000 is
invested in a stock with a beta of 1.8. What is the portfolio's
beta? Do not round intermediate calculations. Round your answer to
two decimal places.
2. AA Corporation's stock has a beta of 0.8. The risk-free rate
is 3%, and the expected return on the market is 11%. What is the
required rate of...

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