Assume that an investment manager has created a portfolio with Stock A and Stock B. Stock A has an expected return of 15% and a weight of 40% in the portfolio. Stock B has an expected return of 20% and a wight of 60%. What is the expected return of the porfolio?

Assume that an investment manager has created a portfolio with Stock A and Stock B. Stock A has an expected return of 15% and a weight of 40% in the portfolio. Stock B has an expected return of 20% and a wight of 60%. What is the expected return of the porfolio?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 18P

See similar textbooks

Similar questions

An investment has probabilities 0.15, 0.34, 0.44, 0.67, 0.2 and 0.15 of giving returns equal to 50%, 39%, -4%, 20%, -25%, and 42%. What are the expected returns and the standard deviations of returns?
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.
Two investments, X and Y, have the characteristics shown below. E(X) = $70, E(Y)3D$120, o =7,000, a = 14,000, and ory =7,500 If the weight of portfolio assets assigned to investment X is 0.3, compute the a. portfolio expected return and b. portfolio risk. a. If the weight of portfolio assets assigned to investment X is 0.3, the portfolio expected retum is $ (Type an integer or a decimal.) b. If the weight of portfolio assets assigned to investment X is 0.3, the portfolio risk is approximately $. (Round to two decimal places as needed.)
Suppose the total risk of Portfolios A, B and C are 49% ², 64%² and 100% ² respectively. The market price of risk is 8%. The Market Portfolio (M) has an expected return and a total risk of 11% and 100% respectively. (a) You want to form another Portfolio H by investing $7,000 in Portfolio A and $3,000 in Portfolio B. Compute the standard deviation of Portfolio H if the correlation coefficient between Portfolio A and Portfolio B is: i) perfectly positively correlated ii) uncorrelated iii) perfectly negatively correlated (b) If the expected return of Portfolio C is 9.4% and it is lying on the Securities Market Line, what is the beta of Portfolio C? State the answer in %². (c) Is Portfolio C a Market Portfolio as it has same level of total risk (i.e. 100% 2) as the Market Portfolio? Why or Why not?
e. Calculate the Portfolio Return when you know that its composition is as follows: Asset A: Weight 25%, Return 11% Asset B: Weight 45%, Return 14% Asset C: Weight 30%, Return 16%
Suppose Stock A has B = 1 and an expected return of 11%. Stock B has a B = 1.5. The risk- free rate is 5%. Also consider that the covariance between B and the market is 0.135. Assume the CAPM is true. Answer the following questions: a) Calculate the expected return on share B. b) Find the equation of the Capital Market Line (CML). c) Build a portfolio Q with B = 0 using actions A and B. Indicate weights (interpret your result) and expected return of portfolio Q.
Find the expected portfolio return and standard deviation if you were to invest 50% of your portfolio in Asset B, 50% in Asset C, with no allocation to Asset A. Compute your answers to the nearest tenth of a basis point. (See attached data file) We know that Asset A: B: C: expected return: 1.16 1.35 1.38 expected standard deviation: 2.88 1.58 2.19
An Equity has a beta of 0.9 and an expected return of 9%. A risk free asset currently earns 2%. i.) What is the expected return on a portfolio that is equally invested in two assets? ii.) If a portfolio of the two assets has an expected return of 6%, what is its beta? iii.) If a portfolio of the two assets has a beta of 1.5, what is its weight ? Iv.) If a portfolio of the two assets has a beta of 1.5, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
Suppose the risk-free rate is 6 percent and the market portfolio has an expected return of 12 percent. The market portfolio has a standard deviation of 7 percent. Portfolio Z has a correlation coefficient with the market of 0.35 and standard deviation of 6 percent. According to the capital asset pricing model, what is the expected return on portfolio Z a. 12.6 percent b. 7.8 percent c. 9.87 percent d. 12.05 percent
You are going to invest $50,000 in a portfolio consisting of assets X, Y, and Z, as follows; What is the expected return of this portfolio? Calculate the beta coefficient of the portfolio
The beta on risky asset A is 1.8 and the beta on risky asset Bis 1.1. The expected return on the market portfolio is 10% and the risk free rate of return is 4%. Consider a portfolio comprising the two riskypssets and the risk-free asset where you invest 50% in risky asset A and 30% in risky asset B. What is (i) the beta of a portfolio and fi) the expected return of the portfolio? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a None of the above b. (i) 0.97 and (ii) 9.829% (1) 1.23 and (ii) 9.8296 (1) 1.23 and (ii) 11.38% ) 0.97 and (ii) 11.38% e
Suppose we have the following information: Securit Amount Invested Expected Return Beta Stock A RM1 ,OOO 8% 0.80 Stock B RM2,OOO 12% 0.95 Stock C RM3,OOO 15% 1.10 Stock D RM4,OOO 18% a) Compute the expected return on this portfolio. b) Calculate the beta of the portfolio. c) Does this portfolio have more or less systematic risk than an average asset? Explain.