Suppose Intel stock has a beta of 0.88, whereas Boeing stock has a beta of 1.18. If the risk-free interest rate is 6.5% and the expected return of the market portfolio is 11.8%, according to the CAPM, a. What is the expected return of Intel stock? b. What is the expected return of Boeing stock? c. What is the beta of a portfolio that consists of 55% Intel stock and 45% Boeing stock?

Suppose Intel stock has a beta of 0.88, whereas Boeing stock has a beta of 1.18. If the risk-free interest rate is 6.5% and the expected return of the market portfolio is 11.8%, according to the CAPM, a. What is the expected return of Intel stock? b. What is the expected return of Boeing stock? c. What is the beta of a portfolio that consists of 55% Intel stock and 45% Boeing stock?

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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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%?
A stock's beta equals 1.34. If the risk-free rate is 1.3% and the market risk premium is 5.9%, what return should be required on this stock if the CAPM model holds? O 8.41% O 9.21% O 7.48% O 10.04% Onone of these
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