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Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.5 10% 40% B 1.0 10% 40% 0.5 40% 10% D -1.5 40% 10% a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest is 4 percent and the market risk premium is 5 percent, what rate of return do you expect to earn from each of the portfolios?

Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.5 10% 40% B 1.0 10% 40% 0.5 40% 10% D -1.5 40% 10% a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest is 4 percent and the market risk premium is 5 percent, what rate of return do you expect to earn from each of the portfolios?

Essentials Of Investments
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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8-23. (Calculating the portfolio beta and expected return) You are putting together a port- folio made up of four different stocks. However, you are considering two possible weightings: Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.5 10% 40% В 1.0 10% 40% 0.5 40% 10% D -1.5 40% 10% a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest is 4 percent and the market risk premium is 5 percent, what rate of return do you expect to earn from each of the portfolios?
Transcribed Image Text:8-23. (Calculating the portfolio beta and expected return) You are putting together a port- folio made up of four different stocks. However, you are considering two possible weightings: Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.5 10% 40% В 1.0 10% 40% 0.5 40% 10% D -1.5 40% 10% a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest is 4 percent and the market risk premium is 5 percent, what rate of return do you expect to earn from each of the portfolios?
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