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The expected return of the S&P 500 stock index is 9% and the risk-free rate is...

The expected return of the S&P 500 stock index is 9% and the risk-free rate is 2%. Using your birthdate as decimal number as the beta for your portfolio. What would you expect the return on your portfolio to be as a percentage? For example if your birthday is September 7th, you would use a beta of 0.907. If you birthday was January 14th, your beta you would use is 0.114. If you birthday is October 3rd, you would use a beta of 1.003. Write down your beta value and the expected return of your portfolio given the S&P index and the risk free rate above. (My birthday is 03/23) so use .323

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Answer #1

HI

Here your beta = 0.323

Market return (S&P stock index return) rm =9%

risk free rate rf = 2%

As per Capital asset pricing model

expected return of portfolio = rf + beta*(rm-rf)

=2 + 0.323*(9-2)

= 2 + 2.261

= 4.26%

Thanks

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