Suppose Woolworths has a beta of 0.79 and Qantas has a beta of 1.51. The risk- free interest rate is 2.00% and the market risk premium is 6.40%. According to the CAPM, what is the expected return on a portfolio with 31% invested in Woolworths, 46% invested in Qantas, and 22% invested in a market security (a diversified portfolio with systematic risk equivalent to the market) and the remainder invested in a risk-free security? Give you answer as a decimal to four decimal places.

Suppose Woolworths has a beta of 0.79 and Qantas has a beta of 1.51. The risk- free interest rate is 2.00% and the market risk premium is 6.40%. According to the CAPM, what is the expected return on a portfolio with 31% invested in Woolworths, 46% invested in Qantas, and 22% invested in a market security (a diversified portfolio with systematic risk equivalent to the market) and the remainder invested in a risk-free security? Give you answer as a decimal to four decimal places.

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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Suppose Autodesk stock has a beta of 2.17, whereas Costco stock has a beta of 0.71. If the risk-free interest rate is 6% and the expected return of the market portfolio is 11.5%, what is the expected return of a portfolio that consists of 65% Autodesk stock and 35% Costco stock, according to the CAPM?
Assume that the current risk-free rate is 14%, and that we expect the return on the GSE Composite Index to be 26%. What is expected to be the systematic risk of MTN shares when the expected return is 30%?
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d. Consider a well-diversified portfolio made up of stocks with the same beta as Intel. What are the beta and standard deviation of this portfolio’s return? The standard deviation of the market portfolio’s return is 20%. e. What is the expected rate of return on each stock? Use the capital asset pricing model with a market risk premium of 8%. The risk-free rate of interest is 4%.
Expected return
Suppose the market premium is 12%, market volatility is 20% and the risk-free rate is 6%. Suppose a security has a beta of 0.8. Using the CAPM, what is its expected return?
According to the CAPM, what is the expected return on a security given market risk premium of 13%, a stock beta of 1.77, and a risk free interest rate of 2%? Put the answer in decimal place.
Assume you wish to hold a portfolio consisting of Loblaw stock and a riskless asset. Given the following information, calculate portfolio expected returns and portfolio betas, letting the proportion of funds invested in Loblaw range from 0 to 125% Loblaw has a beta (\ beta) of 1.2 and an expected return of 18% Risk-free rate is 7%. Loblaw weights: 0%, 25%, 50%, 75%, 100%
Consider a T-bill with a rate of return of 6% and the following risky securities: Security A: E(r) = 9%; Standard Deviation = 9% Security B: E(r) = 10%; Standard Deviation = 11% security C: E(r)= 16%; Standard Deviation = 20% Security D: E(r) = 18%; Standard Deviation = 26% From which set of portfolios, formed with the T-bill and any one of the four risky securities, woulda risk-averse investor always choose his portfolio? Select one: A. The set of portfolios formed with the T-bill and security D. B.The set of portfolios formed with the T-bill and security A. oC. The set of portfolios formed with the T-bill and security B. D. The set of portfolios formed with the T-bill and security c. E. Cannot be determined.
give me step by step solution In the wonderland country, the return on the market portfolio is 14,45%, and standard deviation of market return is 12,1% and the risk free return is 2,65%. You may form a portfolio with the securities X, Y and Z with the following characteristics: parameters security x security y security z beta 0.96 1.07 1,95 total risk 38.5% 25.4% 23.8% protifolio weight 25% 40% 35% Which security has the lowest total risk? b) If the market return decrease 0,85%, which is the expected impact in security Y return? c) Determine the expected beta and expected return of the portfolio with weights as represented in the table above. d) Determine the unsystematic risk associated to security X
Suppose Woolworths has a beta of 0.51 and Qantas has a beta of 1.78. The risk- free interest rate is 2.20% and the market risk premium is 5.20%. According to the CAPM, what is the expected return on a portfolio that borrowed 38% of its value at the risk free rate and invested 33% in Woolworths, 39% in Qantas, and the remainder in a market security (a diversified portfolio with systematic risk equivalent to the market)? Report your answer as a decimal to four decimal places.

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