Suppose you have a portfolio that has $290 in stock A with a beta of 1.04, $1, 160 in stock B with a beta of 1.34, and $870 in the risk-free asset. You have another $580 to invest. You wish to achieve a beta for your whole portfolio to be the same as the market beta. What is the beta of the added security?

Q: Consider the following data for two risk factors (1 and 2) and two securities (J and L): λ0 = 0.07…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: You have constructed a well-diversified active portfolio A that inhibits the following security…

A: 1. Active Portfolio CharacteristicsThe active portfolio AAA has the following characteristic line:…

Q: a) Suppose the risk-free rate is `X'% and the expected rate of return on the market portfolio is…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Suppose Stock A has ß = 1 and an expected return of 11%. Stock B has a B = 1.5. The risk- free rate…

A: The Capital Asset Pricing Model, Expected return  will be calculated as under  Ke = Rf +  β (Rm -…

Q: 2) Stock Y has a beta of 1.28 and an expected return of 13.7 percent. Stock Z has a beta of 1.02 and…

A: In this question  we are given expected returns and beta of two stocks i.e. Stock Y and Stock Z and…

Q: What is the beta of a portfolio made up of two risky assets and a risk-free asset? You invest 35% in…

A: Beta: Beta can be defined as the measure of instability of a separate stock relative to the…

Q: what must the beta be for the other stock in your portfolio?

A: The beta of a portfolio helps measure the portfolio's systematic risk. The portfolio beta is…

Q: 1. A security has an expected rate of return of 0.11 and has a beta (B) of 1.5. The risk-free rate…

A: 1) Expected return = 11% Beta = 1.5 Risk free rate (Rf) = 5% Market return (Rm) = 9%

Q: You want to construct a portfolio containing equal amounts of U.S. Treasury bills, stock A, and…

A: Proportion invested in Stock A, Stock B and Treasury Bills are equal that is 1/3 Beta of Stock A is…

Q: Assume that there are two factors that price assets. Interest rate rf = 4%. You have the following…

A: Here,Risk Free Rate is 4%AssetE(r)Beta of Factor 1Beta of Factor 2115%1.51212%`10.8

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return XYZ Inc has 1.6 Beta and .19…

A: The required rate of return for a firm depends on the risk free rate, beta and market premium. Beta…

Q: You have a portfolio that is equally invested in Stock F with a beta of .95, Stock G with a beta of…

A: Calculation of beta of the portfolio:- The market beta is always equal to one. Portfolio beta = Beta…

Q: (Portfolio beta and CAPM) You are putting together a portfolio made up of four different stocks.…

A: A portfolio is an assortment of securities—cash, stocks, bonds, and other investments—that an…

Q: a) Suppose the risk-free rate is 7% and the expected rate of return on the market portfolio is 10%.…

A: The question is based on the concept of security valuation by use of the capital asset pricing model…

Q: The expected return and standard deviation of Stock A are 12% and 24%, respectively. The expected…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Assume CAPM holds. Consider a portfolio that consist of a risk-free asset and two risky assets A and…

A: M = 0.5A +0.5B  µM = 11% σA = 20% σB = 40% ρAB = 0.75 Risk-free rate=2%…

Q: Suppose the risk-free rate is 8%. The expected return on the market is 16%. If a particular stock…

A: Capital Asset Pricing Model: This model explains the relationship between the expected return and…

Q: An investor can design a risky portfolio based on two stocks, X and Y. Stock X has an expected…

A: Given information:Expected return of stock X (Ex) = 13%Expected return of stock Y(Ey) = 16%Risk-free…

Q: Assume that there is a portfolio with an E(r) =20% and σ = 30%. Also, the risk-free rate of return…

A: Portfolio Expected return E(r) is 20% Standard Deviation is 30% Risk free rate is 7% Degree of risk…

Q: calculate the beta of the portfolio below consisting of assets x, y and z. discuss the meaning of…

A: Beta of an asset represents the volatility with respect to the market. It measures the systematic…

Q: You've assembled the following portfolio: Stock Expected return Beta Portfolio weight 1 0.128 1.8…

A: Beta is primarily used to calculate the systematic risk in the capital asset pricing model. The beta…

Q: You invest $700 in a security with a beta of 1.4 and $300 in another security with a beta of 0.8.…

A: You have invested $700 in a security with a beta of 1.4.You have invested $300 in another security…

Q: A portfolio manager is considering adding another security to his portfolio. The correlations of the…

A: The more negatively correlate a stock is with the portfolio, the more diversification it's addition…

Q: If the market portfolio has a required return of 0.12 and a standard deviation of 0.40, and the…

A: Security market line (SML): The security market line (SML) is the graphic depiction of the Capital…

Q: The risk-free rate and the expected market rate of return are 0.06 and 0.12 respectively. Using the…

A: CAPM model is introduced to measure the minimum required return rate using the following values and…

Q: Suppose that an asset has a CAPM beta of 1.5. Which one of the following statemenits is correct? OA…

A: Beta is the measurement of the volatility of the returns on an asset when compared to market…

Q: The risk-free rate and the expected market rate of return and 0.056 and 0.125. Using the CAPM model,…

A: The CAPM formula is used to calculate the expected returns of an asset. It is based on the idea of…

Q: You own a portfolio equally invested in a risk-free asset and two stocks (If one of the stocks has a…

A: Information Provided: Beta of one stock = 0.91 Beta of risk-free asset = 0 Beta of total portfolio…

Q: Security A has an expected rate of return of 22% and a beta of 2.5. Security B has a beta of 1.2. If…

A: The expected return is calculated using the CAPM formula as below: Expected Return = Riskfree rate +…

Q: Assume that you have a portfolio of two stocks, X and Y. If the risk of stock X is 1.2 and the risk…

A: Given, the risk of stock X is 1.2 and the risk of stock Y is 4

Q: Suppose that you use Arbitrage Pricing Theory (APT) to evaluate well-diversified portfolios. The…

A: Arbitrage pricing theory is a multi factor assets pricing model which is based on that assets return…

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A: Risk refers to variability of return and is measured by the standard deviation. The total risk of a…

Q: Assume that a security is fairly priced and has an expected rate of return of 0.13. The market…

A: Expected rate  return = Risk free rate of return + Beta ( Market rate of return - Bisk free rate of…

Q: You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a…

A: Since equally invested in risk free asset and 2 stocks Weight of each stock=(1/3)

Q: If the market portfolio has a required return of 0.12 and a standard deviation of 0.40, and the…

A: SML is an abbreviation used for security market line. It represent the market equilibrium and its…

Q: Assume that security returns are generated by the single-index model, Ri = αi + βiRM + ei where Ri…

A: A variance of return refers to the risk embedded in a security or an investment portfolio. Variance…

Q: vvk.1   Portfilio A has an expected return of 12% and a beta of1.2. Portfolio B has an expected…

A: The objective of the question is to determine if there is an arbitrage opportunity and if so, what…