Suppose that the S&P 500, with a beta of 1.0, has an expected return of 12% and T-bills provide a risk-free return of 3% a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of Expected Return Beta (i) 0 (ii) 0.25 (iii) 0.50 (iv) 0.75 (v) 1.0 (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter the value of Expected return as a percentage rounded to 2 decimal places and value of Beta rounded to 2 decimal places.) b. How does expected return vary with beta? (Do not round intermediate calculations.) Fill in the bolded part The expected return (increases/decrease) by ( %) for a one unit increase in beta.
Suppose that the S&P 500, with a beta of 1.0, has an expected return of 12% and T-bills provide a risk-free return of 3%
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of
Expected Return Beta
(i) 0
(ii) 0.25
(iii) 0.50
(iv) 0.75
(v) 1.0
(Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter the value of Expected return as a percentage rounded to 2 decimal places and value of Beta rounded to 2 decimal places.)
b. How does expected return vary with beta? (Do not round intermediate calculations.)
Fill in the bolded part
The expected return (increases/decrease) by ( %) for a one unit increase in beta.
Given
- Expected return of S&P=12%
- S&P 500 beta=1.0
- T-bills' risk-free return=3%
- T-bill's beta=0
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