Expected return of a portfolio using beta. The beta of four stocks-P, Q, R, and S-are 0.59, 0.89, 1.05, and 1.31, respectively and the beta of portfolio 1 is 0.96, the beta of portfolio 2 is 0.87, and the beta of portfolio 3 is 1.05. What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 4.5% (risk-free rate) and a market premium of 12.0% (slope of the line)? What is the expected return of stock P? % (Round to two decimal places.)
Expected return of a portfolio using beta. The beta of four stocks-P, Q, R, and S-are 0.59, 0.89, 1.05, and 1.31, respectively and the beta of portfolio 1 is 0.96, the beta of portfolio 2 is 0.87, and the beta of portfolio 3 is 1.05. What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 4.5% (risk-free rate) and a market premium of 12.0% (slope of the line)? What is the expected return of stock P? % (Round to two decimal places.)
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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Transcribed Image Text:**Expected Return of a Portfolio Using Beta**
The beta of four stocks—P, Q, R, and S—are 0.59, 0.89, 1.05, and 1.31, respectively. The beta of Portfolio 1 is 0.96, the beta of Portfolio 2 is 0.87, and the beta of Portfolio 3 is 1.05. What are the expected returns of each of the four individual assets and the three portfolios if the current Security Market Line (SML) is plotted with an intercept of 4.5% (risk-free rate) and a market premium of 12.0% (slope of the line)?
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*Question:* What is the expected return of stock P?
*Instruction:* % (Round to two decimal places.)
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