Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the processof buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio. Alpha has an expected return of 22.5% and abeta of 1.20. The total value of your current portfolio is $90,000. What will the expected return and beta on the portfolio be afterthe purchase of the Alpha stock? Do not round your intermediate calculations.11.42%; 1.0411.54%; 1.2615.07%; 1.33O12.15%; 1.2013.97%; 0.97

The calculations are: Value of Alpha stocks = 1000 shares * $10 per share= $10,000New value of the…

Answered: Assume that you hold a well-diversified…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 25P

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You hold a diversified portfolio consisting of a $10,000 investment in each of 20 different common stocks (that is, your total investment is $200,000). The portfolio beta is equal to 1.2. You have decided to sell one of your stocks that has a beta equal to 0.7 for $10,000. You plan to use the proceeds to purchase another stock that has a beta equal to 1.4. What will be the beta of the new portfolio?
You are an investor in common stock, and you currently hold a well-diversified portfolio which has an expected return of 12 percent, a beta of 1.2, and a total value of $9,000. You plan to increase your portfolio by buying 100 shares of AT&E at $10 a share. AT&E has an expected return of 20 percent with a beta of 2.0. What will be the expected return and the beta of your portfolio after you purchase the new stock? Group of answer choices ~r(sub p) = 20.0%; βp = 2.00 ~r(sub p) = 12.8%; βp = 1.28 ~r(sub p) = 12.0%; βp = 1.20 ~r(sub p) = 13.2%; βp = 1.40 ~r(sub p) = 14.0%; βp = 1.32
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?
By using the formula of risk and return, find the answer:
An investor owns a portfolio that includes a risk-free asset and shares of Amazon. The risk-free rate is 4% and the expected return on Amazon stock is 21%. What is the expected return on this portfolio, assuming that the investor allocates 25% of the wealth to the risk-free asset and the rest to Amazon stock?
You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its net are summarized below. 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 18% and that the risk-free rate is 6%. Stock A, Investment = $188,000, Beta=1.50, Stock B, Investment = $282,000, Beta =0.50, Stock C, Investment = $470,000, Beta = 1.30 Beta of the portfolio ? Expected rat of return ? %
Required: a. The expected returns for stock A and stock B b. The standard deviation of stock A and stock B's returns. c. Assume that you invest 40% of your wealth in stock A and 60% of your wealth in the S&P 500. Calculate the expected return of your portfolio.
a) Assume that you bought 200 stock B in your portfolio for total investment of $1200, now the market price of the stock is $75, the dividend paid for this stock is $2 each year. How much is the capital gain of this stock? b) Assume that the following data available for the portfolio, calculate the expected return, variance and standard deviation of the portfolio given stock A accounts for 45% and stock B accounts for 55% of your portfolio? A B Expected return 12.50% 18.50% Standard Deviation of return 15% 20% Correlation of coefficient (p) 0.4
You have $15,000 invested in one stock (Stock A). The risk-free rate is 0.05. Stock A has an expected return of 0.12 and σ of 0.40. The market portfolio has an expected return of 0.10 and σ of 0.18. You decide to be a CAPM investor. Calculate your dollar investment in the market portfolio such that your CAPM portfolio delivers an expected return equal to the expected return of stock A.
You have $122,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 17.6 percent. Stock X has an expected return of 14.0 percent and a beta of 1.26, and Stock Y has an expected return of 9.5 percent and a beta of 1.00. a. How much money will you invest in Stock Y? (A negative answer should be indicated by a minus sign. Do not round Intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the beta of your portfolio? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a. Investment in Stock Y b. Beta of the portfolio
You have $122,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 17.6 percent. Stock X has an expected return of 14.0 percent and a beta of 1.26, and Stock Y has an expected return of 9.5 percent and a beta of 1.00. a. How much money will you invest in Stock Y? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What is the beta of your portfolio?
You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.5. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 2.2. What will the portfolio's new beta be after these transactions? Do not round intermediate calculations. Round your answer to two decimal places.

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