You hold a well-diversified portfolio of commons shares that has an expected return of 12%, a beta of 1.2, and a totalvalue of P900. You plan to increase your portfolio by buying 10 shares of HLCM at P10 a share. HLCM has anexpected return of 20% with a beta of 2.0.1. What will be the beta of your portfolio after the purchase the new stock?а.2.50b.1.28С.1.19d.1.102. The expected return of the portfolio after the purchase the new stock isа.15.0%b.12.8%C.11.1%d.10.2% An investor is forming a portfolio by investing P25,000 in stock A that has a beta of 1.50, and P25,000 in stock B that hasa beta of 0.80. The return on the market is equal to 6 percent and Treasury bonds have a yield of 4 percent. Whatis the required rate of return on the investor's portfolio?a.6.3%b.6.8%С.7.8%d.8.0%

The total value of portfolio = P 900 Beta of current portfolio = 1.2 Expected return of current…

Answered: You hold a well-diversified portfolio…

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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My broker just called and offered to sell me a stock with an expected return of 30% annually. If the risk-free rate is 2% and the expected return on the market is 16%, then how much riskier is this stock than the average stock in the market? Select one: O a. 1.0x (same risk) O b. 2.0x (twice as risky) O c. 2.27x O d. 3.0x Oe. None of the above.
You hold a diversified portfolio consisting of many different common stocks with a total market value of $100,000. The portfolio beta is equal to 1.15. You have decided to sell one of your stocks, a lead mining stock whose beta is equal to 0.8 , for $10,000 net and to use the proceeds to buy $10,000 of stock in a steel company whose beta is equal to 1.5 . What will be the new beta of the portfolio? (Round to two digit decimal places, e.g., 1.15)
You hold a diversified portfolio consisting of a $10,000 investment in each of 15 different common stocks (i.e., your total investment is $150,000). The portfolio beta is equal to 1.1. You have decided to sell one of your stocks which has a beta equal to 1.4 for $10,000. You plan to use the proceeds to purchase another stock which has a beta equal to 1.4. What will be the beta of the new portfolio? Show your answer to 2 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…
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A share of stock with a beta of 0.8 currently sells for $50. Investors expect the stock to pay a year-end dividend of $5. The T-bill rate is 1%, and the market risk premium is 6%. If the stock is perceived to be fairly priced today, what much be investors' expectation of the price of the stock at the end of the year? $_ Hint: [CAPM] Expected Return (R) = Rf + Beta *Market Risk Premium; Expected Return (R) = Dividend Yield + Capital Gains Yield, where dividend yield=D1/PO and capital gains yield = (P1-Po)/PO
You hold a diversified portfolio consisting of a $10,000 investment in each of 20 different common stocks (that is, your total investment is $200,000). The portfolio beta is equal to 1.2. You have decided to sell one of your stocks that has a beta equal to 0.7 for $10,000. You plan to use the proceeds to purchase another stock that has a beta equal to 1.4. What will be the beta of the new portfolio?
What is the expected return of your portfolio if you own 700 shares of Shark, which are priced at $20.00 each and have a beta of 1.13, and 558 shares of Rhino, which are priced at $15.00 each and have a beta of 0.89, and if the expected return on the market is 13.00%, inflation is 1.00%, and the risk - free return 3.00%? (Round the value to 100th decimal and Please enter the value only without converting it to a decimal format. If the answer is 8.55%, enter 8.55)
Suppose you hold a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, suppose you have decide to sell one of the stocks in your portfolio with a beta equal to 1.0 for 7,500 and to use these proceeds to buy another stocks for your portfolio. Assume the new stocks beta to 1.75. Calculate your portfolios new beta.
An investor is considering investing in the following two shares: Beta Fortress plc. 1.4 Castle plc 0.5 A) if the return on treasury bills is 5% and the market risk premium is 10%, what is the expected return of a portfolio made up of 40% fortress shares and 60% of castle shares? B) explain beta in the context of the CAPM and explain what the betas for fortress and castle shares imply about those shares C) shares in the empire plc have a beta of 0.9 and are expected to have a return of 16%. Given the information in part A are empire shares correctly priced according to the CAPM? Explain your answer and what is likely to happen to the shares in Empire PLC. D)explain what to the market risk premium and risk free rate of return in the CAPM represent. E)rxplain why it is difficult to empirically test the CAPM.
sa.3
An investor has $1000 initial wealth for investment and he borrows another $500 at the risk free rate. He then invest the entire total amount of $1500 in the market portfolio. What is his portfolio beta? +2.0 1.0 + 1.50

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