Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data: . a. Calculate the betas for portfolios A and B. b. If the risk-free rate is 1.8% and the market return is 7.8%, calculate the required retum for each portfolio using the CAPM. Review Only Click the icon to see the Worked Solution. a. The beta of portfolio A is (Round to three decimal places.) The beta of portfolio B is (Round to three decimal places.) b. The required return of portfolio A is %. (Round to two decimal places.) The required return of portfolio B is %. (Round to two decimal places.) 9: Data Table (Click on the icon here in order to copy its contents of the data table below into a spreadsheet.) Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1 1.34 15% 34% 2 0.72 33% 12% 3 1.27 13% 18% 4 1.15 15% 27% 5 0.88 24% 9% Total 100% 100%
Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered the following data: . a. Calculate the betas for portfolios A and B. b. If the risk-free rate is 1.8% and the market return is 7.8%, calculate the required retum for each portfolio using the CAPM. Review Only Click the icon to see the Worked Solution. a. The beta of portfolio A is (Round to three decimal places.) The beta of portfolio B is (Round to three decimal places.) b. The required return of portfolio A is %. (Round to two decimal places.) The required return of portfolio B is %. (Round to two decimal places.) 9: Data Table (Click on the icon here in order to copy its contents of the data table below into a spreadsheet.) Portfolio Weights Asset Asset Beta Portfolio A Portfolio B 1 1.34 15% 34% 2 0.72 33% 12% 3 1.27 13% 18% 4 1.15 15% 27% 5 0.88 24% 9% Total 100% 100%
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:10. Jason Jackson is attempting to evaluate two possible portfolios consisting of the same five assets but held in different
proportions. He is particularly interested in using beta to compare the risk of the portfolios and, in this regard, has gathered
the following data: °.
a. Calculate the betas for portfolios A and B.
b. If the risk-free rate is 1.8% and the market return is 7.8%, calculate the required return for each portfolio using the
САРМ.
Review Only
Click the icon to see the Worked Solution.
a. The beta of portfolio A is
(Round to three decimal places.)
The beta of portfolio B is
(Round to three decimal places.)
b. The required return of portfolio A is
%. (Round to two decimal places.)
The required return of portfolio B is
%. (Round to two decimal places.)
9: Data Table
(Click on the icon here
in order to copy its contents of the data table below into a spreadsheet.)
Portfolio Weights
Asset Asset Beta Portfolio A
Portfolio B
1
1.34
15%
34%
2
0.72
33%
12%
3
1.27
13%
18%
4
1.15
15%
27%
5
0.88
24%
9%
Total
100%
100%
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