What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. Do you expect the investment to be a good one for the coming year if betas for the two portfolio components are 0.6 and 1.3, respectively?

What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. Do you expect the investment to be a good one for the coming year if betas for the two portfolio components are 0.6 and 1.3, respectively?

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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Assume that expected return of the stock A in Rachel’s portfolio is 13.6% this year. The risk premium on the stocks of the same industry are 4.8%, betas of these stocks is 1.5 and the inflation rate was 2.7%. Calculate the risk-free rate of return using Capital Market Asset Pricing Model (CAPM)
The Treasury bill rate is 3%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market?b. What is the required return on an investment with a beta of 1.8? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)c. If an investment with a beta of 0.8 offers an expected return of 8.2%, does it have a positive or negative NPV?d. If the market expects a return of 12.9% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
SHIELD Enterprises has an expected return of 15% and a beta of 1.5. HYDRA Industries has an expected return of 20% and a beta of 2. The risk-free rate is 6%. Does an arbitrage opportunity exist? If yes, how can an investor can take advantage of it. Give specific details about how to form the portfolio, what to buy and what to sell.
What is the expected return of a portfolio that has $8,000 invested in S and $2,000 invested in T? The risk-free rate is 6% and the market portfolio's return is 14%. What is the required return of the portfolio if betas for the two portfolio components are 0.6 and 1.3, respectively? Do you expect the investment to be a good one for the coming year? Why or why not? Probability of State of Economy 25% Return if State Occurs State of Economy Stock S Stock T 30% 15% 10% Вoom Normal 50% 15% Recession 25% -10% 13%
You are examining a portfolio manager’s active investing portfolio. The portfolio has a beta of 2 and has an average return of 15%. The risk free rate is 1% and the market return is 10%, is the manager’s active investing strategy working ?
Suppose that you currently have $100,000 invested in a portfolio with an expected return of 13% and a volatility of 8%. The efficient (tangent) portfolio has an expected return of 17% and a volatility of 10%. The risk-free rate of interest is 1%. Suppose that you want to keep the expected return equal to the current rate of 13%. Accordingly, the level of risk you can expect is: 1.00% 3.75% 4.75% 5.15% None of the above
The Treasury bill rate is 4%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.7 offers an expected return of 9.0%, does it have a positive or negative NPV? d. If the market expects a return of 12.0% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.) a. Market risk premium b. Return on investment % C. NPV d. Beta
The Treasury bill rate is 6%, and the expected return on the market portfolio is 10%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.) c. If an investment with a beta of 0.8 offers an expected return of 9.0%, does it have a positive or negative NPV? d. If the market expects a return of 11.0% from stock X, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Market risk premium |% a. b. Return on investment % с. NPV d. Beta
What is portfolio A's CAPM beta based on your analysis? Round off your answer to three digits after the decimal points. State your answer as a percentage point as 1.234. Compute the Treynor measure for portfolio B. Round off your answer to three digits after the decimal point. State your answer as 1.234
Suppose now that your portfolio must yield an expected return of 13% and be efficient, that is, on the best feasible CAL. What is the proportion invested in the T-bill fund?
Consider the single factor APT. Portfolio A has a beta of 1.5 and an expected return of 20 %. Portfolio B has a beta of 0.7 and an expected return of 16%. The risk - free rate of return is 8%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio and a long position in portfolio
Suppose that you have $1 million and the following two opportunities from which to construct a portfolio:a. Risk-free asset earning 12% per year.b. Risky asset with expected return of 30% per year and standard deviation of 40%.If you construct a portfolio with a standard deviation of 30%, what is its expected rate of return?

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