An investor holds a diversified portfolio with a beta equal to 1.2, consisting of a P1,000 investment in each of 10 differentcommon stocks. He sold one of your stocks that has a beta equal to 0.7 for P1,000. The whole proceeds was usedto purchase another stock that has a beta equal to 1.4. Determine the beta of the new portfolio?а.1.21b.1.27C.1.32е.1.33 Eraser Corp. has an investment fund amounting to P3,000,000. The fund consist of three stocks as follows:StockInvestmentBetaPAL1,000,0002.3JFC500,0001.2СЕВ500,0001.1DITO1,000,0001The market required rate of return is 10% while the risk-free rate is 3%1. What is the portfolio beta?а.1.48b. 1.70С.1.95d. 2.102. What is the market Risk Premium?а.3%b. 7%С.10%d. 13%3. What is the required rate of return of the portfolio?а. 12.52b. 13.36C.14.80d. 15.20

Beta of portfolio is weighted average beta of all stocks in the portfolio.

Answered: stor holds a diversified portfolio with…

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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Assume that you have just received information from your investment advisor that your portfolio has reached a value of $1,250,000. Your portfolio consists of three stocks, as follows: Stock Amount Invested % of Total Beta A $250,000 20% 1.12 B $400,000 32% .85 C $600,000 48% .55 Total: $1,250,000 100% Calculate the beta of this investment portfolio. Assume that the expected market return ( r m ) is 9 percent and the expected risk- free rate ( RF ) is 2 percent. What is the expected return ( r j ) for this investment portfolio?
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Sally has investments with the following characteristics in her portfolio: Investment in Beta Amount invested Stock Q 1.5 $80,000 Stock R 2.0 $50,000 Stock S 0.85 $70,000 Given the risk free rate of 2% and the market return of 7%, what is the expected rate of return of Sally’s investment portfolio?
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Ab. 102.
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2. An investor is evaluating a two-asset portfolio of the following two securities. Portfolio A: 75% Ooredoo and 25% Woqod Portfolio B: Investor has QAR 100,000 and will invest QAR 50,000 in Woqod Expected returns and risks: ● ● ● ● Expected Return 12.50% Woqod 10.80% The correlation between Ooredoo and Woqod is 0.72. Calculate: a. Expected return of both the portfolios Security Ooredoo Expected Risk (0) 26.40% 22.50%
Donald Gilmore has $100,000 invested in a 2-stock portfolio. $70,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Y's beta is 0.70. What is the portfolio's beta? Select the correct answer. a. 1.31 b. 1.36 c. 1.41 d. 1.46 e. 1.26
Anna holds a portfolio comprising the following 3 stocks: X, Y and Z. Investment Amount Beta. Expected return Security X $2000. 1.3. Security Y $1000. 1. 10% Security Z. $500. 0. 2% a. Determine the expected return of security X. b. Calculate the return of Anna’s portfolio. c. Calculate the beta of Anna’s portfolio. d. To reduce the systematic risk of the portfolio, Anna is considering 3 securities to add to the portfolio. Security A has a beta of 0, security B has a beta of 0.5 and Security C has a beta of -0.3. Discuss which security will be most effective in reducing the portfolio’s systematic risk? How would portfolio expected return change (higher or lower) if you add this security?
A portfolio comprises Coke (beta of 1.4) and Wal-Mart (beta of 1). The amount invested in Coke is $20,000 and in Wal-Mart is $30,000. What is the beta of the portfolio? О А. 1.33 В. 1.16 С. 1.51 D. 1.39

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