Suppose you form a portfolio consisting of $31,000 invested in a mutual fund with beta of 1.6, $18,000 invested in $19,000 invested in an index fund with the same beta as the entire market. Expected market risk premium is 6.3% Risk-free rate is 0.8% What the expected return of this portfolio according to the CAPM? a. 6.9% Ob. 6.6% O c. 7.2% d. 9.1% e. 5.8%
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![Suppose you form a portfolio consisting of $31,000 invested in a mutual fund with beta of 1.6, $18,000 invested in Treasury securities
$19,000 invested in an index fund with the same beta as the entire market. Expected market risk premium is 6.3%. Risk-free rate is 0.8% What is the exped
return of this portfolio according to the CAPM?
O a. 6.9%
Ob. 6.6%
O c. 7.2%
d. 9.1%
e. 5.8%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F29bdc729-eeba-4034-8f4b-26b16c29518a%2F42b974e0-9e36-4394-acc2-541fb05d8ce2%2Fdke1vrg_processed.jpeg&w=3840&q=75)
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- Consider a portfolio consisting of the below securities with the below characteristics: Security Amount Invested($) Beta Expected Return A 1,5 MIL 1.0 12.0%B 1.0 MIL 1.5 13.5%C 2.0 MIL 0.8 9.0% Required:a) Calculate the portfolio’s Beta. b) Calculate the portfolio’s expected return. c) Discuss the Capital Asset Pricing Model (CAPM) explaining what it is used forand which are its limitations.CAPM As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return CAPM Beta 1.20 0.80 9.0% 10.0 a. If the risk-free rate is 3.9 percent and the expected market risk premium (E(RM)-RFR) is 6.1 percent, calculate the required return for each mutual fund according to the CAPM. b. Using the estimated required of returns from part (a) along with your return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?Suppose we have the following information: Securit Amount Invested Expected Return Beta Stock A RM1 ,OOO 8% 0.80 Stock B RM2,OOO 12% 0.95 Stock C RM3,OOO 15% 1.10 Stock D RM4,OOO 18% a) Compute the expected return on this portfolio. b) Calculate the beta of the portfolio. c) Does this portfolio have more or less systematic risk than an average asset? Explain.
- Problem 3 )As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 If the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ. 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Portfolio Y Z Market Risk-free Rp 13.5% бр 35.00% 12.5 30.00 7.1 20.00 10.6 4.4 25.00 0 Вр 1.55 1.20 0.80 1.00 0 Assume that the correlation of returns on Portfolio Y to returns on the market is 0.70. What percentage of Portfolio Y's return is driven by the market? Note: Enter your answer as a decimal not a percentage. Round your answer to 4 decimal places. × Answer is complete but not entirely correct. R-squared 0.9785Suppose a portfolio is given as follows: Securities Weight BPW CJW AJT O 6.0% O 5.0% 0.3 O 5.1% 0.4 O 7.0% Onone listed Expected Standard Return Deviation 6% 7% 0.3 5% What is the expected return of the portfolio (to 1 decimal place)? 6% 4% 3%
- As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 f the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ.An investor plans to invest funds in the following stocks: Stock Beta Amount Invested A 1.39 $1,939.00 B 1.21 $2,818.00 C 0.75 $1,378.00 The risk-free rate is currently 3.00%, while the market risk premium is 6.00%. What is the beta of this portfolio?The following data are available to you as portfolio manager: Security Estimated return (%) Beta A 40 3.0 B 35 2.5 C 30 1.0 D 17.5 1.8 E 20.0 1.5 Market Index 25 2.0 Government Security 17 0 In terms of the security market line, which of the securities listed above are underpriced? Assuming that a portfolio is constructed using equal proportions of the five securities listed above, calculate the expected return and risk of such a portfolio
- An investor is forming a portfolio by investing P25,000 in stock A that has a beta of 1.50, and P25,000 in stock B that has a beta of 0.80. The return on the market is equal to 6 percent and Treasury bonds have a yield of 4 percent. What is the required rate of return on the investor's portfolio? a. 6.3% b. 6.8% С. 7.8% d. 8.0%As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 If the risk-free rate (RFR) is 3.9% and the expected market risk premium (ie., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ. 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?Consider a portfolio comprise of three securities in the following proportion and with the indicated securities beta. Security Amount Invested Beta Expected return A 1.5million 1.0 12% B 1million 1.5 13.5% C 2million 0.8 9% Calculate the portfolio’s; Beta Expected return Determine whether this portfolio have more or less systematic risk than an average asset.
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