You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is tocreate a portfolio that has an expected return of 12.1 percent. Stock X has an expectedreturn of 10.28 percent and a beta of 1.20, and Stock Y has an expected return of 7.52percent and a beta of .80.a.How much money will you invest in Stock Y? (A negative answer should be indicatedby a minus sign. Do not round intermediate calculations and round your answer to2 decimal places, e.g., 32.16.)b.What is the beta of your portfolio? (Do not round intermediate calculations and roundyour answer to 3 decimal places, e.g., 32.161.)a. Investment in Stock Yb. Portfolio beta Consider the following information about Stocks I and II:Rate of Return If StateOccursProbability of State of-EconomyState of EconomyStock IStock IIRecession.15.05-.21Normal70.18.10Irrational exuberance.15.07.39The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. (Do notround intermediate calculations. Enter your standard deviation answers as a percentrounded to 2 decimal places, e.g., 32.16. Round your beta answers to 2 decimalplaces, e.g., 32.16.)The standard deviation on Stock I's return ispercent, and the Stock I beta isThe standarddeviation on Stock Il's return ispercent, and the Stock II beta isTherefore, based on thestock's systematic risk/beta, Stockis riskier.

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You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.1 percent. Stock X has an expected return of 10.28 percent and a beta of 1.20, and Stock Y has an expected return of 7.52 percent and a beta of .80. a.How much money will you invest in Stock Y? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b.What is the beta of your portfolio? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g.., 32.161.) a. Investment in Stock Y b. Portfolio beta

You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 12.1 percent. Stock X has an expected return of 10.28 percent and a beta of 1.20, and Stock Y has an expected return of 7.52 percent and a beta of .80. a.How much money will you invest in Stock Y? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b.What is the beta of your portfolio? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g.., 32.161.) a. Investment in Stock Y b. Portfolio beta

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 $95,621 to invest in two stocks and the risk-free security. Stock A has an expected return of 13.32 percent and Stock B has an expected return of 9.77 percent. You want to own $31,048 of Stock B. The risk-free rate is 3.14 percent and the expected return on the market is 10.25 percent. If you want the portfolio to have an expected return equal to that of the market, how much should you invest (in $) in the risk-free security? Answer to two decimals. (Hint: A negative answer is OK - it means you borrowed (rather than lent or invested) at the risk free rate.)
You have a portfolio with a beta of 1.30. What will be the new portfolio beta if you keep 84 percent of your money in the old portfolio and 16 percent in a stock with a beta of 1.07? (Do not round intermediate calculation and round your answer to 2 decimal places.) New portfolio beta
Your client has $103,000 invested in stock A. She would like to build a two-stock portfolio by investing another $103,000 in either stock B or C. She wants a portfolio with an expected return of at least 15.0% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation? Expected Return Standard Deviation Correlation with A A 16% 46% 1.00 B 14% 38% 0.18 C 14% 38% 0.28 The expected return of the portfolio with stock B is %. (Round to one decimal place.)
You have been managing a $5 million portfolio that has a beta of 1.15 and a required rate of return of 9.025%. 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 0.95, 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 invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: 0.8, -1.3, 0.95, 1.2, and 1.4. The risk-free return is 3% and the market return is 7%. a. Compute the beta of the portfolio. b. Compute the required return of the portfolio.
You have $138,000 to invest in a portfolio containing Stock X, Stock Y, and a risk - free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 13 percent and that has only 76 percent of the risk of the overall market. If X has an expected return of 31 percent and a beta of 1.8, Y has an expected return of 20 percent and a beta of 1.2, and the risk - free rate is 7 percent, how much money will you invest in Stock Y?
You want to invest $45,000 in a portfolio with a beta of no more than 1.44 and an expected return of 14.3%. Bay Corp. has a beta of 0.83 and an expected return of 10.8%, and City Inc. has a beta of 1.9 and an expected return of 16.98%. The risk-free rate is 6%. You can invest in Bay Corp. and City Inc. How much will you invest in each?
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 $19,878 to invest in a stock portfolio. Your choices are Stock "X" with an expected return of 12.5% and Stock Y with an expected return of 8.24%. If your goal is to create a portfolio with an expected return of 11.92%, how much money will you invest in Stock X? State of Economy Probability of State of Economy Return Stock A Return Stock B Return Stock C Boom 0.20 19.41% 20.65% 29.51% Good 0.35 8.08% 10.59% 13.88% Poor 0.40 5.53% 3.23% 5.04% Bust 0.05 1.77% 1.47% 1.16% Your portfolio is invested 23% each in stock A and C and the remaining in stock B. What is the expected return of the portfolio? NOTE: Enter the PERCENTAGE number rounding to two decimals. If your decimal answer is 0.034576, your answer must be 3.46. DO NOT USE the % sign A Stock has a beta of 1, the expected return on the market is 17.72%, and the risk-free rate is 4.85%. What must the expected return on this stock be? NOTE: Enter the PERCENTAGE number rounding to two…
You own a portfolio that has $2,650 invested in Stock A and $4,450 invested in Stock B. If the expected returns on these stocks are 8 percent and 11 percent, respectively, what is the expected return on the portfolio? Stock A value Stock B value Stock A E(R) Stock B E(R) Complete the following analysis. Do not hard code values in your calculations. Portfolio value Weight of A Weight of B $ 2,650 $ 4,450 8.00% 11.00% Portfolio E(R)

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