Question

Expected return of a portfolio using beta. The beta of four stocks—G, H, I, and J—are 0.45, 0.79, 1.07, and 1.58, respectively and the beta of portfolio 1 is 0.97, the beta of portfolio 2 is 0.82, and the beta of portfolio 3 is 1.11. What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 3.0% (nisk-free rate) and a market premium of 11.0% (slope of the line)? What is the expected return of stock G? % (Round to two decimal places.) Enter your answer in the answer box and then click Check Answer. parts 6 remaining Clear All Check Answer

Answer 1

Expected return on stock G Expected return on stock H Expected return on stock 7.95% =3%+0.45*11% 11.69% -3%+0.79*11% 14.77% =3%+1.07*11% Expected return on stock J 20.38% =3%+1.58*11% Expected return on portfolio 1 | 13.67% =3%+0.97*11% Expected return on portfolio 2 12.02% =3%+0.82*11% Expected return on portfolio 3 15.21% =3%+1.11*11%

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