If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Slope of the line 15.71 X %
If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Slope of the line 15.71 X %
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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What is the slope of the line?
Transcribed Image Text:**Problem Statement:**
If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
**Feedback:**
- Answer is complete but not entirely correct.
**Student's Response:**
- Slope of the line: 15.71% (incorrect)
Transcribed Image Text:**Portfolio Analysis of Asset W and a Risk-Free Asset**
Asset W is characterized by an expected return of 10.0% and a beta of 1.1. Assuming a risk-free rate of 3.0%, the following table outlines the expected return and beta for various portfolios consisting of Asset W and a risk-free asset. Note: Expected return values are rounded to two decimal places, and beta values are rounded to three decimal places.
| Percentage of Portfolio in Asset W | Portfolio Expected Return (%) | Portfolio Beta |
|-------------------------------------|--------------------------------|----------------|
| 0 | 3.00 | 0.000 |
| 25 | 4.75 | 0.275 |
| 50 | 6.50 | 0.550 |
| 75 | 8.25 | 0.825 |
| 100 | 10.00 | 1.100 |
| 125 | 11.75 | 1.375 |
| 150 | 13.50 | 1.650 |
The table illustrates how the expected return and beta of a portfolio change as the proportion of Asset W in the portfolio varies from 0% to 150%. Here, the completeness and accuracy of the calculations are indicated by the checkmarks.
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