A stock has a beta of 1.2 and an expected return of 14 percent. A risk-free asset currently earns 3.8 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected return % b. If a portfolio of the two assets has a beta of 0.20, what are the portfolio weights? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Stock Risk-free asset Portfolio Weight % % c. If a portfolio of the two assets has an expected return of 12.50 percent, what is its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Beta

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
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A stock has a beta of 1.2 and an expected return of 14 percent. A risk-free asset currently earns 3.8 percent.
a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter
your answer as a percent rounded to 2 decimal places.)
Expected return
%
b. If a portfolio of the two assets has a beta of 0.20, what are the portfolio weights? (Do not round intermediate calculations. Enter
your answers as a percent rounded to 2 decimal places.)
Stock
Risk-free asset
Portfolio Weight
%
%
c. If a portfolio of the two assets has an expected return of 12.50 percent, what is its beta? (Do not round intermediate calculations.
Round your answer to 4 decimal places.)
Beta
Transcribed Image Text:A stock has a beta of 1.2 and an expected return of 14 percent. A risk-free asset currently earns 3.8 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Expected return % b. If a portfolio of the two assets has a beta of 0.20, what are the portfolio weights? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Stock Risk-free asset Portfolio Weight % % c. If a portfolio of the two assets has an expected return of 12.50 percent, what is its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Beta
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