SECTION B Instruction: Complete ALL questions from this section. 3/5 Question 1 Suppose you are the money manager of a $2 million investment fund. The fund consists of four stocks with the following investments and betas. Stocks Investment Beta JBG $ 200,000 1.50 GRACE $ 300,000 -0.50 LASD $ 500,000 1.25 HBN $1,000,000 0.75 The current risk-free rate of return is 6.5% and the expected return on the market portfolio is 16%. Required: A. Compute the required rate of return for EACH stock using the Capital Asset pricing Model. B. Compute the Expected Return of the portfolio. C. Compute the Portfolio Beta.
SECTION B Instruction: Complete ALL questions from this section. 3/5 Question 1 Suppose you are the money manager of a $2 million investment fund. The fund consists of four stocks with the following investments and betas. Stocks Investment Beta JBG $ 200,000 1.50 GRACE $ 300,000 -0.50 LASD $ 500,000 1.25 HBN $1,000,000 0.75 The current risk-free rate of return is 6.5% and the expected return on the market portfolio is 16%. Required: A. Compute the required rate of return for EACH stock using the Capital Asset pricing Model. B. Compute the Expected Return of the portfolio. C. Compute the Portfolio 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
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Transcribed Image Text:SECTION B
Instruction: Complete ALL questions from this section.
3/5
Question 1
Suppose you are the money manager of a $2 million investment fund. The fund consists of four
stocks with the following investments and betas.
Stocks
Investment
Beta
JBG
$ 200,000
1.50
GRACE
$ 300,000
-0.50
LASD
$ 500,000
1.25
HBN
$1,000,000
0.75
The current risk-free rate of return is 6.5% and the expected return on the market portfolio is
16%.
Required:
A.
Compute the required rate of return for EACH stock using the Capital Asset pricing
Model.
B.
Compute the Expected Return of the portfolio.
C.
Compute the Portfolio Beta.
D.
Differentiate between diversifiable and non-diversifiable risks. How do the Beta and
Standard Deviation differ in relation to these risks?
...
...
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