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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.) Correlation Beta Portfolio Weight Volatility (A) (B) (C) (D) 0.29 10% 0.34 0.41 21% 0.61 0.30 13% 0.58 HEC Corp Green Widget Alive And Well Expected Return (E) 1% % %

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.) Correlation Beta Portfolio Weight Volatility (A) (B) (C) (D) 0.29 10% 0.34 0.41 21% 0.61 0.30 13% 0.58 HEC Corp Green Widget Alive And Well Expected Return (E) 1% % %

Essentials Of Investments
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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Q11-5

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.) Correlation Portfolio Weight Volatility (A) (B) Beta (D) (C) 0.29 10% 0.34 0.41 21% 0.61 0.30 13% 0.58 HEC Corp Green Widget Alive And Well Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Portfolio Weight Volatility 10% 21% 13% HEC Corp Green Widget Alive And Well 0.29 0.41 0.30 Expected Return (E) % 1% % Correlation with the Market Portfolio 0.34 0.61 0.58 - X
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.) Correlation Portfolio Weight Volatility (A) (B) Beta (D) (C) 0.29 10% 0.34 0.41 21% 0.61 0.30 13% 0.58 HEC Corp Green Widget Alive And Well Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Portfolio Weight Volatility 10% 21% 13% HEC Corp Green Widget Alive And Well 0.29 0.41 0.30 Expected Return (E) % 1% % Correlation with the Market Portfolio 0.34 0.61 0.58 - X
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