1l NormalT No Spaci... Heading 1Heading 2ReplaceTitleSubtitleSubtle Em...ChangeStyles Select-FontParagraphStyles4.Editing8.6.I' 101 11.12• 13.4. Based on the following information CalculateState of Economy Probability of State of EconomyRate of Return if State OccursStock AStock BRecession0.200.05-0.17Normal0.550.080.12Boom0.250.130.29d) Suppose Stock A has a beta of 0.8 and Stock B has a beta of 1.3. If you invest $35,000 in Stock Aand $45,000 in Stock B, what is the beta of this portfolio?e) Expected return on the market (RM) is 10% and the risk-free (r;) is 4%. What must the theexpected return on the portfolio according to CAPM? (Use the beta you have calculated in section d)for CAPM)E 130%ENG 00:30INTL 2021/01/1958English (U.S.)ere to search

A model that represents the relationship of the required return and beta of a particular asset is…

d) Suppose Stock A has a beta of 0.8 and Stock B has a beta of 1.3. If you invest $35,000 in Stock A and $45,000 in Stock B, what is the beta of this portfolio? e) Expected return on the market (RM) is 10% and the risk-free (r) is 4%. What must the the expected return on the portfolio according to CAPM? (Use the beta you have calculated in section d) for CAPM)4

d) Suppose Stock A has a beta of 0.8 and Stock B has a beta of 1.3. If you invest $35,000 in Stock A and $45,000 in Stock B, what is the beta of this portfolio? e) Expected return on the market (RM) is 10% and the risk-free (r) is 4%. What must the the expected return on the portfolio according to CAPM? (Use the beta you have calculated in section d) for CAPM)4

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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Similar questions

Assume the betas for securities A, B, and C are as shown here. (Click on the icon here in order to copy its contents of the data table below into a spreadsheet.) Security Beta A 1.58 B 0.65 C −0.23 If you have a portfolio with $30,000 invested in each of Investment A, B, and C, what is your portfolio beta?
The risk-free rate is 2%, the market risk premium is 8.00%, and portfolio A has a beta of 2. What is the required rate of return on this portfolio?
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and an expected return of 15%. The other stock has an expected return of 21%. The total portfolio is equally as risky as the market (i.e.Bp=1). What is the beta for the other stock in your portfolio? What is the expected return of the risk-free asset? What is the expected return of the market? What is the expected return of your portfolio?
Suppose the risk-free return is 4% and the market portfolio has an expected return of 10% and a volatility of 16%. 3M stock has a 22% volatility and a correlation with the market of 0.50. Required 1.what is 3M's beta with the market? 2. What capital market line portfolio has equivalent market risk 3. what is the expected return?
Consider two types of assets: market portfolio (M) and stock A. The expected return is 8% and standard deviation of the market portfolio is 15%. The risk-free rate is 2%. The standard deviation of market portfolio returns is 15%. The standard deviation of stock A is 30%, and the beta coefficient is 1. Draw the capital market line and show the position of stock A.
You have a portfolio that is equally invested in Stock F with a beta of 1.09, Stock G with a beta of 1.46, and the market. What is the beta of your portfolio?
When the return on the market portfolio goes up by 5%, the return on Stock A goes up onaverage by 8% and when the market portfolio return goes down by 5%, Stock A return goes down by 6%.a) Calculate the beta of this stock.b) Assuming that CAPM holds, calculate the required rate of return on this stock by assigning values forthe risk-free rate and the expected return on the market portfolio depending on your own choice. (The useof the same risk-free rate and market return by different students will be treated as a cheat attempt).
1. A stock has a beta of 1.15 and an expected return of 14 percent. A risk-free asset Currently earns 4.2 percent. a . What is expected return on a portfolio that is equally in inverted assets? b. if portfolio of the two assets has beta of 75, what are the portfolio weights? C. if a portfolio of the two assets has an expected return of 8 percent .what is its beta? the two
An investor is forming a portfolio by investing $50,000 in stock A which has a beta of 2.40, and $50,000 in stock B which has a beta of 0.60. The return on the market is equal to 8% and treasure bonds have a yield of 3% (rRF). What’s the portfolio beta? 0.60 1.30 1.50 1.80 Using the information in Question 41, calculate the required rate of return on the investor’s portfolio 11.0% 15.0% 12.0% 10.5% A retail store is offering a diamond ring for sale for 36 months at $128 per month. The retail price of the ring is $4,000. What is the interest rate on this offer? 9.43% 11.20% 11.98% 12.11%
The risk-free rate is 3 percent. Also, the expected return on the market portfolio is 10.5 percent.a. Calculate the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of the individual stocks" expected returns, where the weights are the percentage invested in each stock.)b. Calculate the portfolio beta.c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph.d. From your plot in part c, which stocks appear to be your winners, and which ones appear to be your losers?e. Why should you consider your conclusion in part d to be less than certain?
You have a $1,000 portfolio which is invested in stocks A, B, and a risk-free asset. $400 is invested in stock A. Stock A has a beta of 1.33 and stock B has a beta of 0.66. How much needs to be invested in stock B if you want a portfolio beta of 0.94?

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