You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.08 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Portfolio beta

You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.08 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 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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. The following questions are related to modern portfolio theory. • Assume there are only two stocks in the equity market. •The risk-free rate is 1.00%. Stock Return Volatility Correlation Matrix Y 0.7 1.0 X Y X 15.00% 20.00% 1.0 10.00% 15.00% 0.7 (a) Make an investment portfolio using the risky assets that has an expected return 12%. (b) Calculate the volatility of the portfolio in (a).
After learning the course, you divide your portfolio into three equal parts (i.e., equal market value weights), with one part in Treasury bills, one part in a market index, and one part in a mutual fund with beta of 0.72. What is the beta of your overall portfolio? 고
Baghiben
Suppose that many stocks are traded in the market and that it is possible to borrow at the risk-free rate, rƒ. The characteristics of two of the stocks are as follows: Stock Expected Return Standard Deviation A 8% 55% B 4% 45% Correlation = −1 Required: a. Calculate the expected rate of return on this risk-free portfolio? (Hint: Can a particular stock portfolio be formed to create a “synthetic” risk-free asset?) (Round your answer to 2 decimal places.) b. Could the equilibrium rƒ be greater than rate of return?
You own a portfolio equally invested in a risk-free asset and two stocks. One of has risky as has a beta of 1.6, and the total portfolios is equally as risky as the market. What's the beta of the second stock?
Consider the following table, which gives a security analyst’s expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return Aggressive Stock Defensive Stock 1 0.5 6% 2.0% 5.0% 2 0.5 20 32 15 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A : Beta D: b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) % Rate of Return on A: % Rate of Return on B:
You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.27 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Beta
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.23 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock beta
Q1: Explain the meaning and significance of a stock's beta coefficient. Illustrate your explanation by drawing, on one graph, the characteristic lines for stocks with low, average, and high risk. (Hint: Let your three characteristic lines intersect at r_i=r_m=6%, the assumed risk-free rate.) Q2: Define the following terms, using graphs or equations to illustrate your answers where feasible. a) Risk, stand-alone risk b) Expected rate of return c) standard deviation, variance d) risk premium for stock i, market risk premium e) Capital Asset Pricing Model (CAPM) f) Expected return on a portfolio g) market risk, diversifiable risk h) Beta i) Security Market Line; SML equation j) Slope of SML and its relationship to risk aversion. Q3. Differentiate between (a) stand-alone risk and (b) risk in a portfolio context. How are they measured, and are both concepts relevant for investors? Q4. Can an investor eliminate market risk from a portfolio of common stocks? How many stocks must a portfolio…
A stock has a beta of 1.38 and an expected return of 13.6 percent. If the risk-free rate is 4.7 percent, 1)what is the expected return on a portfolio that is equally invested in the two assets? 2. if a portfolio of the assets has a beta of 0.98, what are the portfolio weights? 3. if a portfolio of the two assets has an expected return of 12.8 percent, what is its beta? 4. If a portfolio of the two assets has a beta of 2.58, what are the portfolio weights?
Find the weights of the two pure factor portfolios constructed from the following three securities: r1 = .06 + 2F¡ + 2F, r2 = .05 + 3F, + IF, r3 = .04 + 3F, + OF, Then write out the factor equations for the two pure factor portfolios, and determine their risk premiums. Assume a risk-free rate that is implied by the factor equations and no arbitrage.
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and an expected return of 15%. The other stock has an expected return of 21%. The total portfolio is equally as risky as the market (i.e.Bp=1). What is the beta for the other stock in your portfolio? What is the expected return of the risk-free asset? What is the expected return of the market? What is the expected return of your portfolio?

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