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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Suppose you hold a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, suppose you have decide to sell one of the stocks in your portfolio with a beta equal to 1.0 for 7,500 and to use these proceeds to buy another stocks for your portfolio. Assume the new stocks beta to 1.75. Calculate your portfolios new beta.
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
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?
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.15. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use the proceeds to buy another stock with a beta of 2.00. What would your portfolio's new beta be? Do not round intermediate calculations. Round your answer to two decimal places.
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.
You hold a diversified $100, 000 portfolio consisting of 20 stocks with $5,000 invested in each. The portfolio's beta is 1.12. You plan to sell a stock with b = 0.90 and use the proceeds to buy a new stock with b = 1.50. What will the portfolio's new beta be? Do not round your intermediate calculations. a. 1.500 b. 1.310 c 1.195 d. 1.165 e. 1.150 .
You want your portfolio beta to be .95. Currently, your portfolio consists of $4,000 invested in Stock A with a beta of 1.26 and $7,000 in Stock B with a beta of .94. You have another $8,000 to invest and want to divide it between an asset with a beta of 1.74 and a risk-free asset. How much should you invest in the risk-free asset? Multiple Choice O $3,966 $4,425 $4,902 $4,305 $5,083
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 $218,000 1.50 B 327,000 0.60 C 545,000 1.18 D 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 17 percent and that the risk-free rate is 8 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 Expected rate of return %
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

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