You want to create a portfolio that is 80% as risky as the market. You can choose to invest in either Stock B with a beta of 2 or the risk-free asset. How much do you invest in Stock B? A. 40% B. 50% C. 60% D. 70%

You want to create a portfolio that is 80% as risky as the market. You can choose to invest in either Stock B with a beta of 2 or the risk-free asset. How much do you invest in Stock B? A. 40% B. 50% C. 60% D. 70%

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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Question

You want to create a portfolio that is 80% as risky as the market. You can choose to invest in either Stock B with a beta of 2 or the risk-free asset. How much do you invest in Stock B?

A. 40%

B. 50%

C. 60%

D. 70%

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Similar questions

You want your portfolio beta to be 1.16. Currently, your portfolio consists of $3,000 invested in stock A with a beta of 1.64 and $2,000 in stock B with a beta of 0.75. You have another $5,000 to invest and want to divide it between an asset with a beta of 1.48 and a risk-free asset. How much should you invest in the risk-free asset? Multiple Choice O O O O 1575 1500 225 1230 510
1. What is your expected portfolio return of an investment portfolio with a 60/40 allocation of stocks and bonds, respectively, if you expect long term equities to return 8%, and long term bonds to return 2%? 5.6% 6.2% 4.8% 5.1% 2. You are looking into developing your first investment portfolio. After assessing your risk tolerance, you believe that an 90/10 allocation of stocks and bonds, respectively, is where you want to begin. You believe that 7% is what stocks will return over the next ten years, and 4% is what you expect to return in your bond portfolio. If you invest $300/month for the next ten years, what will your portfolio be worth? $51,077 $47,579 $52,843 $44,880
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Stock A's stock has a beta of 1.30, and its required return is 11.00%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Select the correct answer. a. 8.45% b. 8.50% c. 8.60% d. 8.55% e. 8.65%
None
You own a portfolio that has a total value of $250,000 and it is invested in Stock D with a beta of 79 and Stock E with a beta of 1.46. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D? $78,358.21 $58,768.85 O $39,179.50 O $68.563.43 O $171,641.79
Find the Beta for Stock Y given the Expected Return of Stock Y is 18.4% The expected return on the Market Portfolio is 28.4% and Risk-Free Rate is 4.5 %. Select one: O a. 0.60 O b. 0.90 O c None O d. 0.56 O e. 0.80
Question: State Probability Return on Stock XXX Cement Return on Stock YYY Cement Return on Stock ZZZ Cement 1 25% 21 23 20 2 15% 19 25 22 3 20% 20 24 24 4 15% 22 22 26 5 Find? 23 26 28 Use the above information and to answer the following: Assume you are the investor who wants to invest in a two stock/security portfolio made from the above Stocks of your choice? a) Find the expected return of your portfolio formed from the stocks of your choice given above AND you decide the weights for the stocks in the portfolio. b) Calculate your returns from the portfolio assuming you invest $ 15000 c) Find the Covariance and correlation coefficient for your portfolio d) Justify as to on what basis did you choose these stocks and how did you decide the weights?
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You want to create a portfolio equally as risky as the market, and you have $250,000 to invest. Given this information, fill in the three missing pieces of information in the following table. Show your calculations: Investment Betal 0.90 Asset Stock A $50,000 Stock B $70,000 Stock C Risk-Free Asset 1.25 1.60
A) What expected return should an investor expect from investments in common stock? You are given the following information: Risk free rate of return = 4%; market risk premium = 11%; Beta of the stock (assume CAPM holds) = 0.72. B) Stock A with beta of 0.8 offers a 11% return while stock B with a beta of 1.2 offers a 15% return. What is the risk-free rate? What is the common market return? Assume CAPM holds.

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