16. Assume the betas for securities A, B, and C are as shown here. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)SecurityABC.673BetaIf you have a portfolio with $30,000 invested in each of Investment A, B, and C, what is your portfolio beta? Using the portfolio beta and assuming a risk-free rate of 5%, what would you expect the return of your portfolio to be if the marketearned 20.8% next year? Declined 19.6%?The beta of your portfolio is(Round to three decimal places.)The return of your portfolio to be if the market earned 20.8% isIf the market earned 20.8%, the value of your portfolio is $The return of your portfolio to be if the market declined 19.6% isIf the market declined 19.6%, the value of your portfolio is $1.620.63- 0.23(Round to the nearest dollar.)%. (Round to two decimal places and enter as a negative number if the return decreased.)%. (Round to two decimal places and enter as a negative number if the return decreased.)(Round to the nearest dollar.)

Beta of Portfolio:0.673 Return of Portfolio (20.8%)15.64% Value of Portfolio (20.8%)$104,076 Return…

Answered: 16. Assume the betas for securities A,…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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(Security market line) You are considering the construction of a portfolio comprised of equal investments in each of four different stocks. The betas for each stock are found below Asset A Beta 2.30 B C D 0.80 0.60 -1.60 (Click on the icon in order to copy its contents into a spreadsheet.) a. What is the portfolio beta for your proposed investment portfolio? b. How would a 25 percent increase in the expected return on the market impact the expected return of your portfolio? c. How would a 25 percent decrease in the expected return on the market impact the expected return on each asset? d. If you are interested in decreasing the beta of your portfolio by changing your portfolio allocation in two stocks, which stock would you decrease and which would you increase? Why? a. The portfolio beta for your proposed investment portfolio is (Round to three decimal places)
portfolio.. - Word **** References Mailings Review View Help RCM Acrobat Foxit Reader PDF Foxit PDF 5. The risk-free rate and the expected market rate of return are 0.04 and 0.14, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.25 is equal to: a. 0.004 b. 0.165 C. 0.121 d. 0.132
8. Assume the risk-free rate is 6.7% and the expected return on the market portfolio is 7.8%. Use the capital asset pricing model (CAPM) to find the required return for each of the securities in the table here, 7. Review On Click the icon to see the Worked Solution. The required return for investment A is %. (Round to one decimal place.) The required return for investment B is %. (Round to one decimal place.) The required return for investment C is %. (Round to one decimal place.) The required return for investment D is %. (Round to one decimal place.) The required return for investment E is %. (Round to one decimal place.) 7: Data Table (Click on the icon here in order to copy its contents of the data table below into a spreadsheet.) Security Beta A 1.34 в 0.93 0.13 0.96 E 0.67
You want to create a portfolio equally as risky as the market, and you have $5M to invest. Given the information below, what is your investment in the risk-free asset? Asset Stock A Stock B Stock C Risk-free Asset $0.8M $0.7M $0.9M $1.1M Investment $1M $2M Beta 0.7 1.25 1.5
Suppose you are the money manager of a P4.0 investment portfolio consists of stocks with the following investment and betas: Stock Beta S 1.5 T (0.50) A 1.25 R 0.75 If the market required return is 14% and the risk free rate is 6%,a) What is the portfolio beta?b) What is the portfolio required rate of return?
The following data are available to you as portfolio manager: Security Estimated return (%) Beta A 40 3.0 B 35 2.5 C 30 1.0 D 17.5 1.8 E 20.0 1.5 Market Index 25 2.0 Government Security 17 0 In terms of the security market line, which of the securities listed above are underpriced? Assuming that a portfolio is constructed using equal proportions of the five securities listed above, calculate the expected return and risk of such a portfolio
2b) Write the equation of the Security Market Line (SML). Compute and draw the SML when the expected return of the NASDAQ index (market portfolio) is 17% and the return to the risk-free asset is 7%.
Suppose you observe the following situation: Security Ruby Pearl Expected Return 14.9% 21.0% Beta 0.70 2.13 A). If these two securities are correctly priced, calculate the risk-free rate. Round your answer to 4 decimal points. B). If these two securities are correctly priced, find the market risk premium (using the findings of Requirement-A). Round your answer to 4 decimal points. C). If the current market data shows that the risk-free rate is 3.52 percent, are these securities fairly priced? Comment on your answer. Round your answers to 4 decimal points. D). Calculate the expected return and beta of an equally weighted portfolio of these two securities. Round your answers to 3 decimal points.
You decide to form a portfolio of the following amounts invested in the following stocks. What is the beta of the portfolio? SET YOUR CALCULATOR TO 4 DECIMAL PLACES THEN INPUT THE ANSWER ROUNDING TO 2 DECIMALS i.e. if your answer is 1.2455, enter it as 1.25. Amount Beta Expected Return $9,370 0.69 10.50% Microsoft $5,598 1.6 16.90% $4,261 1.1 15.75% $4,668 2.39 11.80% Stock Apple Ford Time Warner
You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock Investment Beta A $222,000 1.41 B 333,000 0.53 C 555,000 1.30 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 12 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) Beta of the portfolio enter the beta rounded to 3 decimal places Expected rate of return enter percentages rounded to 2 decimal places %
Consider a portfolio consisting of the following three stocks: an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. ▪ The volatility of the market portfolio is 10% and it has b. Using your answer from part a, calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part c, calculate the expected return of the portfolio and verify that it matches your answer to part b.
You invest $700 in a security with a beta of 1.4 and $300 in another security with a beta of 0.8. The beta of the resulting portfolio is _________ Group of answer choices a. 1.40 b. 1.00 c. 0.36 d. 1.22 e. 0.80

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