You have been managing a $5 million portfolio that has a beta of 2.00 and a required rate of return of 13.255%. The current risk-free rate is 6%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.75, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places. %

You have been managing a $5 million portfolio that has a beta of 2.00 and a required rate of return of 13.255%. The current risk-free rate is 6%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.75, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two 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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You have a portfolio with a standard deviation of 23% and an expected return of 17%. You are considering adding one of the two stocks in the following table: If after adding the stock you will have 25% of your money in the new stock and 75% of your money in your existing portfolio, which one should you add? Standard deviation of the portfolio with stock A is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Stock A Stock B Expected Return 16% 16% Print Standard Deviation 23% 18% C... Done Correlation with Your Portfolio's Returns 0.3 0.8 - X
You have been managing a $5 million portfolio that has a beta of 1.05 and a required rate of return of 6.675%. The current risk-free rate is 3%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 1.25, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.
You have been managing a $5 million portfolio that has a beta of 1.05 and a required rate of return of 10.775%. The current risk-free rate is 5%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.75, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.
You have $37,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14.7 percent and Stock Y with an expected return of 7.1 percent. Your goal is to create a portfolio with an expected return of 13 percent. All money must be invested. How much will you invest in Stock X? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return. The risk-free rate is 2.20%. You now receive another $11.50 million, which you invest in stocks with an average beta of 0.82. What is the required rate of return on the new portfolio? (Hint: You must first find the market risk premium, then find the new portfolio beta.)
You build a portfolio containing stocks ?A and ?B only and you have shorted ?B such that its portfolio weight is −0.25−0.25. If the expected return on ?A is 15% and on ?B is 13%, what is the expected return (in %) on the portfolio?
You have $261,000 to invest in a stock portfolio. Your choices are Stock H, with an expected return of 14.1 percent, and Stock L, with an expected return of 11.2 percent. If your goal is to create a portfolio with an expected return of 12.55 percent, how much money will you invest in Stock H and in Stock L? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Investment in Stock H Investment in Stock L
You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock A B C Investment $196,000 294,000 490,000 Beta Expected rate of return 1.50 0.55 1.35 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 18 percent and that the risk-free rate is 9 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%) Beta of the portfolio %
Your investment club has only two stocks in its portfolio. $10,000 is invested in a stock with a beta of 0.6, and $25,000 is invested in a stock with a beta of 1.6. What is the portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places.
You have $18,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 13 percent and Stock Y with an expected return of 11 percent. If your goal is to create a portfolio with an expected return of 12.18 percent, how much money will you invest in Stock X and Stock Y? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Stock X Stock Y
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.25. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use the proceeds to buy another stock with a beta of 1.90. What would your portfolio's new beta be? Do not round intermediate calculations. Round your answer to two decimal places.
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.15. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use the proceeds to buy another stock with a beta of 2.00. What would your portfolio's new beta be? Do not round intermediate calculations. Round your answer to two decimal places.

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