Question

Asset W has an expected return of 11.6 percent and a beta of 1.30o. If the risk-free rate is 3.8 percent, complete the following table for portfolios of Asset W and a risk-free asset |(Leave no cells blank - be certain to enter "O" wherever required. Do not round intermediate calculations. Enter your expected returns as a percent rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places, e.g., 32.161.) Percentage of Portfolio Portfolio Expected Return Portfolio Beta in Asset W 0% % 25 50 75 100 % 125 150 %

Answer 1

1 Percentage of portfolio in Asset w 0% Portfolio Beta 25% 50% Portfolio expected return 3.80% 5.75% 7.70% 9.65% 11.60% 13.55% 15.50% 75% 100% 125% 150% 0.325 0.650 0.975 1.300 1.625 1.950 10 Slope of the line 6.48%

B 1 Percentage of portfolio in Asset 2 O 3 0.25 4 0.5 5 =+A4+25% 6 =+A5+25% 7 =+A6+25% 8 =+A7+25% Portfolio expected return =A2*11.6%+(1-A2)*3.8% =A3*11.6%+(1-A3)*3.8% =A4* 11.6%+(1-A4)*3.8% |=A5*11.6%+(1-A5)*3.8% =A6*11.6%+(1-A6)*3.8% =A7*11.6%+(1-A7)*3.8% =A8*11.6%+(1-A8)*3.8% Portfolio Beta =A2*1.3+(1-A2)*0 =A3*1.3+(1-A3)*0 =A4*1.3+(1-A4)*0 =A5*1.3+(1-A5)*0 =A6*1.3+(1-A6)*0 =A7*1.3+(1-A7)*0 =A8*1.3+(1-A8)*0 10 Slope of the line 1=(12.8%-4.7%)/1.25

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