answer part A-D and include a short explanation for each part of how you arrived at your answer. A) If a stock has a beta coefficient, b, equal to 2.2, the risk premium associated with the market is 9 percent, and the risk-free rate is 8.8 percent, application of the capital asset pricing model indicates the appropriate return should be: B) Steve Brickson currently has an investment portfolio that contains four stocks with a total value equal to $80,000. The portfolio has a beta (b) equal to 2.3. Steve wants to invest an additional $20,000 in a stock that has b = 4.5. After Steve adds the new stock to his portfolio, what will be the portfolio's beta? C) You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 2.2. You have decided to sell one of your stocks, a lead mining stock whose b =1.8, for $5,000 net and to use the proceeds to buy $5,000 of stock in a steel company whose b =3.7. What will be the new beta of the portfolio? D) Oakdale Inc. has a beta coefficient of 1.2 and a required rate of return of 15 percent. The market risk premium is currently 8 percent. If the inflation premium increases by 2 percentage points, and Oakdale acquires new assets which increase its beta by 79 percent, what will be Oakdale's new required rate of return?
Please answer part A-D and include a short explanation for each part of how you arrived at your answer.
A) If a stock has a beta coefficient, b, equal to 2.2, the risk premium associated with the market is 9 percent, and the risk-free rate is 8.8 percent, application of the
B) Steve Brickson currently has an investment portfolio that contains four stocks with a total value equal to $80,000. The portfolio has a beta (b) equal to 2.3. Steve wants to invest an additional $20,000 in a stock that has b = 4.5. After Steve adds the new stock to his portfolio, what will be the portfolio's beta?
C) You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 2.2. You have decided to sell one of your stocks, a lead mining stock whose b =1.8, for $5,000 net and to use the proceeds to buy $5,000 of stock in a steel company whose b =3.7. What will be the new beta of the portfolio?
D) Oakdale Inc. has a beta coefficient of 1.2 and a required
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 5 images
