Stock J has a beta of 1.37 and an expected return of 14.01%. Stock K has a beta of .92 and an expected return of 10.95%. 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.)

Stock J has a beta of 1.37 and an expected return of 14.01%. Stock K has a beta of .92 and an expected return of 10.95%. 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.)

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

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.23 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.) Stock beta
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (7 %) (26 %) 0.1 3 0 0.5 14 22 0.2 20 26 0.1 36 50 Calculate the expected rate of return, , for Stock B ( = 14.20%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 18.68%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? If Stock B is less highly correlated with the market than A, then it might have a higher beta than Stock A, and hence be more risky in a portfolio sense. If Stock B is more highly correlated with the market than A, then it might have a higher…
Assume CAPM holds. What is the correlation between an efficient portfolio and market portfolio? a. 1 b.-1 c.0 d. Not enough information Assume CAPM holds. The risk-free rate is 1% and the expected return on the portfolio is 5%. What is the expected return of a stock with a beta of 2? 70%
Stock A has a beta of 1.30, and its required return is 13.25%. Stock B's beta is 0.90. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.)
We know that two stocks A and B are correctly priced by the CAPM model. For A, the expected return is 12%, and the beta is 1.5; for B, the expected return is 6%, and the beta is 0.5. Based on this information, what is the risk free rate and expected market return? Select one: A. 3%; 9% B. 3%; 6% C. 2%; 8% D. 4%; 10%
Start with A-C and I will submit seperately for D! Thank you :)
Parts A-C have already been answered, looking for answer D.
Stocks A and B have the following probability distributions of expected future returns: a. Calculate the expected rate of return, B, for Stock B (A = 12.50%.) Do not round intermediate calculations. Round your answer to two decimal places. % b. Calculate the standard deviation of expected returns, GA, for Stock A (σ = 20.90%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? I. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A, and hence be less risky in a portfolio sense. II. If Stock B is more highly correlated with the market than A, then it might have the same beta as Stock A, and hence be just as risky in a portfolio sense. III. If Stock B is less highly correlated with…
Use the expected return-beta equation from the CAPM. What is the expected return for a stock if the risk-free rate is 4%, beta 0.9 and the expected return for the market portfolio is 6%? What is the risk-free rate if beta is 1.1, the expected return 6.3% and the expected return for the market portfolio is 6%? What is beta if the risk-free rate is 4%, the expected return 11% and the expected return for the market is 6%? What is the expected return for the market if the risk-free rate is 4%, beta 0.9 and the expected return 11%?
Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (5 %) (38 %) 0.2 5 0 0.5 14 21 0.1 23 27 0.1 28 38 Calculate the expected rate of return, , for Stock B ( = 12.60%.) Do not round intermediate calculations. Round your answer to two decimal places. % Calculate the standard deviation of expected returns, σA, for Stock A (σB = 20.20%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Assume the risk-free rate is 2.5%. What are the Sharpe ratios for Stocks A and B? Do not round intermediate calculations. Round your answers to four decimal places. Stock A: Stock B:
If the risk free rate is 4.4%, the expected return on the market portfolio (i.e., Rm)( is 11.6%, and the beta of Stock B is 0.9 , what is the required rate of return for Stock B according to the Capital Asset Pricing Model (CAPM)? (Round your answer rounded to one decimal place and record without a percent sign). Your Answer: If the risk free rate is 1.2%, the market risk premium (i.e., Rm - Rf) is 13.5%, and the beta of Stock B is 1.9 , what is the required rate of return for Stock B according to the Capital Asset Pricing Model (CAPM)? (Round your answer rounded to one decimal place and record without a percent sign). Your Answer:
Stocks A and B have the following probability distributions of expected future returns: Probability B A 0.1 (6%) (38%) 0.1 4 0 0.6 14 24 0.1 24 27 0.1 37 43 a. Calculate the expected rate of return, ^B, for Stock B (A = 14.30%.) Do not round intermediate calculations. Round your answer to two decimal places. % b. Calculate the standard deviation of expected returns, OA, for Stock A (σB = 20.93%.) Do not round intermediate calculations. Round your answer to two decimal places. % Now calculate the coefficient of variation for Stock B. Do not round intermediate calculations. Round your answer to two decimal places. Is it possible that most investors might regard Stock B as being less risky than Stock A? I. If Stock B is more highly correlated with the market than A, then it might have a lower beta than Stock A. and hence be less risky in a portfolio sense.

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