a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) O; (ii) 0.25; (iii) O.50; (iv) 0.75; (v) 1.0? (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations. Enter the value of Expected return as a percentage rounded to 2 decimal places and value of Beta rounded to 2 decimal places.) Expected Return Beta (i) % |(ii) 0.25 % |(ii) 0.50 % (iv) 0.75 % |(v) 1.0 % b. How does expected return vary with beta? (Do not round intermediate calculations.)
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) O; (ii) 0.25; (iii) O.50; (iv) 0.75; (v) 1.0? (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations. Enter the value of Expected return as a percentage rounded to 2 decimal places and value of Beta rounded to 2 decimal places.) Expected Return Beta (i) % |(ii) 0.25 % |(ii) 0.50 % (iv) 0.75 % |(v) 1.0 % b. How does expected return vary with beta? (Do not round intermediate calculations.)
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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Transcribed Image Text:Suppose that the S&P 500, with a beta of 1.0, has an expected return of 11% and T-bills provide a risk-free return of 6%.
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii)
0.25; (iii) 0.50; (iv) 0.75; (v) 1.0? (Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate
calculations. Enter the value of Expected return as a percentage rounded to 2 decimal places and value of Beta rounded to 2
decimal places.)
Expected Return
Beta
(i)
%
(ii)
0.25
%
(iii) 0.50
%
(iv)
0.75
%
(v)
1.0
%
b. How does expected return vary with beta? (Do not round intermediate calculations.)
The expected return
by
% for a one unit increase in beta.
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