Suppose you have portfolio of four stocks Stock A, B, C and D, Total investment in these stocks is equal to 2019331015 $, Beta of these stocks is 1.5, (0.5), 1.25, and 0.75 and proportion invested is 22%, 20%, 30%, and remaining in D. If the Risk free rate is 6% and market rate of return is 15%. Calculate a) Investment in each stock.
Suppose you have portfolio of four stocks Stock A, B, C and D, Total investment in these stocks is equal to 2019331015 $, Beta of these stocks is 1.5, (0.5), 1.25, and 0.75 and proportion invested is 22%, 20%, 30%, and remaining in D. If the Risk free rate is 6% and market rate of return is 15%. Calculate a) Investment in each 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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Suppose you have portfolio of four stocks Stock A, B, C and D, Total investment in these stocks is equal to 2019331015 $, Beta of these stocks is 1.5, (0.5), 1.25, and 0.75 and proportion invested is 22%, 20%, 30%, and remaining in D.
If the Risk free rate is 6% and market
a) Investment in each stock.
b) Market premium
c) Required Rate of return for each stock.
d) Required rate of return of Portfolio.
e) If expected rate of return of stock A is 10%, what do you think if it is overvalued or undervalued.
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