a). Expected Return = [Weight(i) * Return(i)]
= [0.5 * 14%] + [0.5 * 4.5%] = 7% + 2.25% = 9.25%
b). w(Stock) + w(Risk-free Asset) = 1
w(Risk-free Asset) = 1 - w(Stock)
Portfolio's Beta = [Weight(i) * Beta(i)]
0.85 = [w(Stock) * 1] + [w(Risk-free Asset) * 0]
0.85 = w(Stock) * 1
w(Stock) = 0.85, or 85%
w(Risk-free Asset) = 1 - 0.85 = 0.15, or 15%
c). w(Stock) + w(Risk-free Asset) = 1
w(Risk-free Asset) = 1 - w(Stock)
Expected Return = [Weight(i) * Return(i)]
9.25% = [w(Stock) * 14%] + [w(Risk-free Asset) * 4.5%]
9.25% = [w(Stock) * 14%] + [{1 - w(Stock)} * 4.5%]
9.25% = [w(Stock) * 14%] + 4.5% - [w(Stock) * 4.5%]
9.25% - 4.5% = [w(Stock) * 9.5%]
w(Stock) = 4.75% / 9.5% = 0.5
w(Risk-free Asset) = 1 - w(Stock) = 1 - 0.5 = 0.5
Portfolio's Beta = [Weight(i) * Beta(i)]
= [0.5 * 1] + [0.5 * 0] = 0.5 + 0 = 0.5000
d). w(Stock) + w(Risk-free Asset) = 1
w(Risk-free Asset) = 1 - w(Stock)
Portfolio's Beta = [Weight(i) * Beta(i)]
1.36 = [w(Stock) * 1] + [w(Risk-free Asset) * 0]
1.36 = w(Stock) * 1
w(Stock) = 1.36, or 136.00%
w(Risk-free Asset) = 1 - 1.36 = -0.36, or -36.00%
A stock has a beta of 1.0 and an expected return of 14 percent. A risk-free...
A stock has a beta of 1.32 and an expected return of 13 percent. A risk-free asset currently earns 4.4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of.92, what are the portfolio weights? (Do not round intermediate calculations and...
A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset currently earns 3.85 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % b. If a portfolio of the two assets has a beta of .81, what are the portfolio weights? (Do...
A stock has a beta of 1.37 and an expected return of 13.5 percent. A risk-free asset currently earns 4.65 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of .97, what are the portfolio weights? (Do not round intermediate calculations...
A stock has a beta of 1.15 and an expected return of 11.4 percent. A risk-free asset currently earns 3.5 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b.If a portfolio of the two assets has a beta of 7 what are the portfolio weights? (Do not round intermediate calculations and...
A stock has a beta of 1.23 and an expected return of 12.1 percent. A risk-free asset currently earns 3.95 percent Required: (a) What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return (b) If a portfolio of the two assets has a beta of 0.83, what are the portfolio weights? (Do not round...
A stock has a beta of 1.05 and an expected return of 11 percent. A risk-free asset currently earns 2.4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of.63, what are the portfolio weights? (Do not round intermediate calculations and...
A stock has a beta of 1.12 and an expected return of 10.8 percent. A risk-free asset currently earns 2.7 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of .92, what are the portfolio weights? (Do not round intermediate calculations...
7 A stock has a beta of 1.12 and an expected return of 10.8 percent. A risk-free asset currently earns 27 percent a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g, 32.16.) b. If a portfollo of the two assets has a beta of .92, what are the portfolio welghts? (Do not round intermediate...
answer all parts. A stock has a beta of 1.26 and an expected return of 12.4 percent. A risk-free asset currently earns 4.1 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return ____ % ? b. If a portfolio of the two assets has a beta of .86, what are...
Problem 13-20 Using CAPM [LO4] A stock has a beta of 1.50 and an expected return of 14 percent. A risk-free asset currently earns 2 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % b. If a portfolio of the two assets has a beta of .84, what are the...