sts of $58,792 invested in a stock that has a beta = 1.7, $71,686 invested in a stock that has a beta = 1.7, and $92,104 invested in a stock that has a beta = 1.5. The risk-free rate is 4.7%. Last year this portfolio a required return of 7.4%. This year nothing has changed except that the mark risk premium has increased by 2%. What is the portfolio's current required rate of return?
sts of $58,792 invested in a stock that has a beta = 1.7, $71,686 invested in a stock that has a beta = 1.7, and $92,104 invested in a stock that has a beta = 1.5. The risk-free rate is 4.7%. Last year this portfolio a required return of 7.4%. This year nothing has changed except that the mark risk premium has increased by 2%. What is the portfolio's current required rate of return?
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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Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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Transcribed Image Text:Your portfolio consists of $58,792 invested in a stock that has a beta = 1.7,
$71,686 invested in a stock that has a beta = 1.7, and $92,104 invested in a
stock that has a beta = 1.5. The risk-free rate is 4.7%. Last year this portfolio had
a required return of 7.4%. This year nothing has changed except that the market
risk premium has increased by 2%. What is the portfolio's current required rate
of return?
O 7.63%
8.63%
11.63%
9.63%
O 10.63%
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