Your portfolio consists of $75,536 invested in a stock that has a beta-1.2, $85,280 invested in a stock that has a beta-1.8, and $22,313 invested in a stock that has a beta- 1.7. The risk-free rate is 2.6%. Last year this portfolio had a required return of 10.3%. This year nothing has changed except that the market risk premium has increased by 4.1%. What is the portfolio's current required rate of return? O 16.62% O 17.62% 18.12 % 17.12% O 16.12 %

Your portfolio consists of $75,536 invested in a stock that has a beta-1.2, $85,280 invested in a stock that has a beta-1.8, and $22,313 invested in a stock that has a beta- 1.7. The risk-free rate is 2.6%. Last year this portfolio had a required return of 10.3%. This year nothing has changed except that the market risk premium has increased by 4.1%. What is the portfolio's current required rate of return? O 16.62% O 17.62% 18.12 % 17.12% O 16.12 %

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 required return on a particular stock as 14% according to the CAPM. The stock's beta is 1.5. What is the risk-free rate if the expected return on the market portfolio equals 10%
5. Last year, Rocket Inc. earned a 19% return. Farmer's Corp. earned 11%. The overall market return last year was 16%, and the risk-free rate was 2%. If Rocket stock has a beta of 1.8 and Farmer's has a beta of 0.5, which stock performed better once you take risk into account? Review Only Click the icon to see the Worked Solution. Rocket's expected return is %. (Enter as a percentage and round to one decimal place.) Farmer's expected return is %. (Enter as a percentage and round to one decimal place.) Which stock performed better once you take risk into account? (Select the best answer below.) A. Given its beta, Rocket should have earned a much higher return than it did (11% vs 19%). Farmer's, on the other hand, earned a higher return than we would have expected (27.2% vs 9.0%). So taking risk into account, Rocket was the better stock. B. Given its beta, Rocket should have earned a much higher return than it did (27.2% vs 19%). Farmer's, on the other hand, earned a higher return than…
The risk-free rate of return is 3% and the market risk premium is 8%. You hold three stocks in your portfolio: Stock A B C E(R) 9.4% 14.2% 10.2% Value 15,000 33,000 27,000 What is the beta and expected return of your portfolio under CAPM?
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A portfolio at the beginning of the quarter has a market value of $150 million. In the middle of the quarter, the investor adds $75 million and the portfolio value has fallen to $75 million. At the end of the quarter, the portfolio has a market value of $300 million. Calculate (i) the time weighted return for the month and; (ii) the dollar weighted return.
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Tyler Trucks stock has an annual return mean and standard deviation of 10.0 percent and 29 percent, respectively. Michael Moped Manufacturing stock has an annual return mean and standard deviation of 21.0 percent and 65 percent, respectively. Your portfolio allocates equal funds to Tyler Trucks stock and Michael Moped Manufacturing stock. The return correlation between Tyler Trucks and Michael Moped Manufacturing is -.5. What is the smallest expected loss for your portfolio in the coming month with a probability of 2.5 percent? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round the z-score value to 3 decimal places when calculating your answer. Enter your answer as a percent rounded to 2 decimal places.) Smallest expected loss %
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You own a portfolio that has 1,000 shares of stock A, which is priced at $13.43 per share and has an expected return of 16.85 %, and 3,000 shares of stock B, which is priced at $9.10 per share and has an expected return of 7.61%. The risk-free return is 4.72% and inflation is expected to be 2.75%. What is the risk premium for your portfolio? 7.91% (plus or minus 4 bps) 7.51% (plus or minus 4 bps) 5.94% (plus or minus 4 bps) 10.66% (plus or minus 4 bps) None of the above is within 4 bps of the correct answer

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