Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the risk-free rate is 3.2 percent and the market risk premium is 6.8 percent, the reward-to-risk ratios for Stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock Y is and Stock Z is
Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the risk-free rate is 3.2 percent and the market risk premium is 6.8 percent, the reward-to-risk ratios for Stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Stock Y is and Stock Z is
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:Stock Y has a beta of 1.2 and an expected return of 11.5 percent. Stock Z has a beta of .80 and an expected return of 8.5 percent. If the
risk-free rate is 3.2 percent and the market risk premium is 6.8 percent, the reward-to-risk ratios for Stocks Y and Z are
and
percent, respectively. Since the SML reward-to-risk is
percent,
(Do not round intermediate calculations and enter your answers
Stock Y is
and Stock Z is
as a percent rounded to 2 decimal places, e.g., 32.16.)
Transcribed Image Text:Asset W has an expected return of 8.8 percent and a beta of .90. If the risk-free rate is
2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset.
(Do not round intermediate calculations. Enter your expected returns as a percent
rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places,
e.g., 32.161.)
Percentage of Portfolio in
Portfolio Expected
Portfolio
Asset W
Return
Beta
0 %
%
25
%
50
%
75
%
100
%
125
%
150
%
If you plot the relationship between portfolio expected return and portfolio beta, what is
the slope of the line that results? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Slope of the line
%
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