Consider a portfolio consisting of the following three stocks: E. The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. b. Using your answer from part (a), calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b). a. Compute the beta and expected return of each stock. (Round to two decimal places.) Portfolio Weight (A) Volatility (B) Correlation Expected Return (E) Beta (C) (D) HEC Corp 0.23 11% 0.33 % Green Widget 0.31 27% 0.62 Alive And Well 0.46 11% 0.43

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
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Consider a portfolio consisting of the following three stocks: . The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is
3%.
a. Compute the beta and expected return of each stock.
b. Using your answer from part (a), calculate the expected return of the portfolio.
c. What is the beta of the portfolio?
d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b).
a. Compute the beta and expected return of each stock. (Round to two decimal places.)
Portfolio Weight
(A)
0.23
Volatility
(B)
Expected Return
(E)
Correlation
Beta
(C)
0.33
(D)
НЕС Согр
11%
Green Widget
0.31
27%
0.62
Alive And Well
0.46
11%
0.43
%
Transcribed Image Text:Consider a portfolio consisting of the following three stocks: . The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3%. a. Compute the beta and expected return of each stock. b. Using your answer from part (a), calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b). a. Compute the beta and expected return of each stock. (Round to two decimal places.) Portfolio Weight (A) 0.23 Volatility (B) Expected Return (E) Correlation Beta (C) 0.33 (D) НЕС Согр 11% Green Widget 0.31 27% 0.62 Alive And Well 0.46 11% 0.43 %
A
В
C
1
Portfolio Weight
Volatility Correlation with the Market Portfolio
0.23 11%
2 HEC Corp
3 Green Widget
0.33
0.31 27%
0.62
4 Alive And Well
0.46 11%
0.43
6.
Transcribed Image Text:A В C 1 Portfolio Weight Volatility Correlation with the Market Portfolio 0.23 11% 2 HEC Corp 3 Green Widget 0.33 0.31 27% 0.62 4 Alive And Well 0.46 11% 0.43 6.
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