Problem 11-12 Calculating Portfolio Betas [LO 3] You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.22 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Beta

Problem 11-12 Calculating Portfolio Betas [LO 3] You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.22 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Beta

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

See similar textbooks

Similar questions

Problem 13-18 Optimal Sharpe Portfolio Value-at-Risk (LO3, CFA6) You are constructing a portfolio of two assets, Asset A and Asset B. The expected returns of the assets are 10 percent and 13 percent. respectively. The standard deviations of the assets are 32 percent and 40 percent, respectively. The correlation between the two assets is 47 and the risk-free rate is 3.6 percent. What is the optimal Sharpe ratio in a portfolio of the two assets? What is the smallest expected loss for this portfolio over the coming year with a probability of 16 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your Sharpe ratio answer to 4 decimal places and the z-score value to 3 decimal places when calculating your answer. Enter your smallest expected loss as a percent rounded to 2 decimal places.) Sharpe ratio Smallest expected loss %
18
None
24 - Stock A's beta is 1.7 and Stock B's beta is 0.7. Which of the following statements must be true about these securities? (Assume both stocks are at their market equilibriums.) Stock B must be a more desirable addition to a portfolio than A. Stock A must be a more desirable addition to a portfolio than B. The expected return on Stock A should be greater than that on B. The expected return on Stock B should be greater than that on A. When held in isolation, Stock A has more risk than Stock B.
Problem 11-23 Calculating Portfolio Weights [LO 1] Stock J has a beta of 1.28 and an expected return of 13.56 percent, while Stock K has a beta of .83 and an expected return of 10.5 percent. You want a portfolio with the same risk as the market. a. What is the portfolio weight of each stock? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.) b. What is the expected return of your portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) а. Stock J Stock K b. Expected return %
Years 123 45 Probability 0.1 0.2 0.35 0.2 0.15 Investment A 300 350 280 460 500 Investment B 850 560 450 680 700 Investment C 500 600 700 800 900 a) If the investor wants to invest in any two of the above investments equally, which combination of two investments you select based on the portfolio risk? Assume that the correlation between the investments is -0.75 b) From a corporate perspective is unique risk (o) or beta risk (B) the more important consideration? Does it matter?
Problem 11-23 Analyzing a Portfolio You want to create a portfolio equally as risky as the market and you have $2,000,000 to invest. Given this information, fill in the rest of the following table: (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Asset Stock A Stock B Stock C Risk-free asset $ $ 69 Investment 400,000 320,000 CONJU Beta 1.20 1.50 1.60
Vijay
A4 4c Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an expected return of 25% and a beta of 1.5. Stock J has an expected return of 20% and a beta of 0.8. The risk-free asset’s return is 5%. c. Calculate the reward-to-risk ratios for Stock I and Stock J.
p 19 A portfolio analyst has been asked to allocate investment funds among three different stocks. The relevant data for the stocks is shown in the following table f the goal is to maximize return while maintaining risk within acceptable bounds (in this case, a portfolio standard deviation of no more than 20%, find the proper allocation of the funds to each stock O Ak Risk (Standard Deviation to 5) 25% 12% 10% What is the expected retum of the optimal stock portfolio? Stock A B C O Multiple Choice O Return (R) 20% O 10% 15% 17.9% 15 15 19.15 36.4% Pair of Stocks A to B A to C to C Help Joint Risk (Covariance) 0.05 0.075 -0.05 Save & Exit Submit
part 4 5 6
Question 16 RWJ 13-2 CF Stock COOL has an expected return of 10.47 %. The expected market return is 8.31% and the risk-free rate is 4.73%. What is asset COOL’s beta? Question 17 RWJ 13-4 Joe is an analyst with Pomona Securities. His research shows that CPP Enterprises has an expected return of 12%. He also estimated the required rate for return using the Security Market Line for CPP Enterprises to be 10.30%. CPP Enterprises is: Group of answer choices Fairly priced Underpriced Overpriced CPP Enterprises is a bad investment

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS