The portfolio beta is computed as shown below:
= Beta of A x Amount to be invested in stock A + Beta of B x Amount to be invested in stock B
= 1.3 x 0.50 + 1.6 x 0.50
= 1.45
Feel free to ask in case of any query relating to this question
You wish to invest in a portfolio of stocks A (50%) and B (50%). The risk...
You wish to invest in a portfolio of stocks A and B. The risk free rate is 4%. A B Expected return (%) 10 20 Volatility (%) 15 22 Correlation between returns 0.3 Complete the following table for each portfolio Which portfolio has the highest reward to risk (with risk measured as volatility)? Portfolio % in A Expected Return Standard Deviation of Return Sharpe Ratio 1 30% 2 40% 3 50%
CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Standard Deviation 14% 14 14 Beta 0.9 1.3 1.7 Expected Return 9.60 % 11.42 13.24 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5.5%, and...
CAPM, PORTFOLIO RISK, AND RETURN Consider the following information for stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 8.74% 16% 0.9 B 9.57 16 1.1 C 11.64 16 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is 5%, and...
CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta A 9.87 % 14 % 0.9 B 11.16 14 1.2 C 12.88 14 1.6 Fund P has one-third of its funds invested in each of the three stocks. The risk-free...
Problem 8-13 CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) Stock Expected Return Standard Deviation Beta 14 8.78 % 14 % 0.8 10.83 1.3 11.65 1.5 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate is...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Software and Beta Electronics, under three possible degrees of correlation: perfect positive, uncorrelated, and perfect negative. The average return and standard deviation for each stock appears here: Asset Average Return,overbar r Risk (Standard Deviation), s Alpha 5.1% 30.3% Beta 11.2% 50.5% a. If the returns of assets Alpha and Beta are perfectly positively correlated (correlation coefficient equals plus 1),...
You have $10,000 to invest in a portfolio containing Stock R, Stock S, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 15% and that has only 120% of the risk of the overall market. If Stock R has an expected return of 25% and a beta of 1.6, Stock S has an expected return of 17.5% and a beta of 1.3, and the risk-free...
You have $134,000 to invest in a portfolio containing Stock X, Stock Y, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 13 percent and that has only 72 percent of the risk of the overall market. If X has an expected return of 32 percent and a beta of 1.6, Y has an expected return of 20 percent and a beta of 1.2, and...
Problem 8-13 CAPM, portfolio risk, and return Consider the following information for three stocks, Stocks A, B, and C. The returns on the three stocks are positively correlated, but they are not perfectly correlated. (That is, each of the correlation coefficients is between 0 and 1.) 1.3 Stock Expected Return Standard Deviation Beta 9.28 % 14 % 0.8 11.33 14 12.15 14 1.5 Fund P has one-third of its funds invested in each of the three stocks. The risk-free rate...
You have $10,000 to invest in a portfolio containing Stock R, Stock S, and a risk-free asset. You must invest all of your money. Your goal is to create a portfolio that has an expected return of 15% and that has only 120% of the risk of the overall market. If Stock R has an expected return of 25% and a beta of 1.6, Stock S has an expected return of 17.5% and a beta of 1.3, and the risk-free...