e the risk-free rate and the market risk premium is 5% and 6%, respectivel ired return of the manager'sportfolio? Is one of the stocks in the portfolio for P10,000 with a beta of 0.9. The mar w stock that has a beta of 1.6. Determine the required return of her portfo non share?
e the risk-free rate and the market risk premium is 5% and 6%, respectivel ired return of the manager'sportfolio? Is one of the stocks in the portfolio for P10,000 with a beta of 0.9. The mar w stock that has a beta of 1.6. Determine the required return of her portfo non share?
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
Related questions
Question
Transcribed Image Text:A portfolio manager has a P100,000 portfolio, which consists of P10,000 invested in 10 distinct common shares. The
portfolio beta is 1.2 while the risk-free rate and the market risk premium is 5% and 6%, respectively.
1. What is the required return of the manager'sportfolio?
a. 11.85%
b. 11.00%
C.
12.20%
d. 12.5%
2. The manager sells one of the stocks in the portfolio for P10,000 with a beta of 0.9. The manager used the P10,000
to purchase a new stock that has a beta of 1.6. Determine the required return of her portfolio after the purchasing
of the new common share?
а.
10.75%
b. 12.22%
С.
12.62%
d. 13.30%
Transcribed Image Text:You asin investor is interested in acquiring PIZZA shares of stock. Yougather the probability distribution for PIZZA and it is
presented below:
Probability of
Occurring
Rate of return per
Performance of PIZZA
performance
Strong
0.3
-1%
Average
0.5
5%
Weak
0.2
9%
1. What is the expected return for PIZZA?
a.
2%
b. 3.5%
C.
4%
d. 4.4%
2. What is the Variance?
a.
0.0013
b. 0.0026
C.
0.0033
d. 0.0222
3. The standard deviation is
а.
2.76%
b. 2.98%
С.
3.21%
d. 3.61%
4. The coefficient of variation for PIZZA is
а.
0.90
b. 0.72
C.
0.88
d. 1.31
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