Question

: Question Help P 12-32 (similar to) Suppose Intel stock has a beta of 1.64, whereas Boeing stock has a beta of 0.91. If the risk-free interest rate is 6.2% and the expected return of the market portfolio is 13.1%, according to the CAPM, a. What is the expected return of Intel stock? b. What is the expected return of Boeing stock? c. What is the beta of a portfolio that consists of 55% Intel stock and 45% Boeing stock? d. What is the expected return of a portfolio that consists of 55% Intel stock and 45% Boeing stock? (There are two ways to solve this. a. What is the expected return of Intel stock? Intel's expected return is %. (Round to one decimal place.)

Answer 1

Solution: 17.35% Expected return=risk free rate+beta*(market return-risk free rate) 0.062+1.64*(0.13-0.062) Rounded to 17.4% b) Expected return=risk free rate+beta*(market return-risk free rate) 0.062+0.91*(0.13-0.062) Rounded to 12.4% 1.31 Portfolio beta= 1.64*0.55+0.91*0.45 15.12% Portfolio return= 0.1735*0.55+0.1239*0.45