Consider a portfolio consisting of the market, the risk free asset, and stock A with equal weights. Beta of this portfolio is 1.5. What is the beta of stock A?
Calculate the beta of the stock A as follows:
Portfolio beta = Weight *beta
Equal weight = 1/3 = 0.3333333
beta of the risk free rate = 0
Beta of the market = 1
-------------------------------------------
Stock A beta:
1.5 = (0*0.3333333) + (1*0.3333333) + (Beta of stock A * 0.3333333)
Beta of stock A = ( 1.5 - 0.3333333) / 0.3333333
Beta of stock A = 3.5
Consider a portfolio consisting of the market, the risk free asset, and stock A with equal...
4. Consider the following information about the market portfolio, the risk-free asset and funds A and B. Return Standard Deviation Beta 5% 0% Risk-free asset 0 Market portfolio Fund A 15% 20% 1 40% 12% 0 30% Fund B 18% 1.5 Analyze the performance of fund A relative to fund B in the context of the CAPM.
The risk free rate is 4%, and the required return on the market is 12%. a) What is the required return on an asset with a beta of 1.5? b) What is the reward/risk ratio given the required rate of return from (a)? c) What is the required return on a portfolio consisting of 40% of the asset above and the rest in an asset with an average amount of systematic risk? (hint: asset with an average amount of systematic...
show work
(10. You own a portfolio with 50% invested in a risk-free asset, 30% in stock A with a beta of 1.5 and 20% in stock B. Your portfolio has the same expected return as the market portfolio. What is the beta of stock B? (The risk-free rate is 5%). a. 0.43 b. 1.00 c. 1.73 d. 1.85 0.20+1.50 e. 2.75
The risk free rate is 4%, and the expected return on the market is 12%. What is the required return on portfolio consisting of 30% of an asset with a beta of 1.5 and the rest in an asset with no risk? A) 7.6% B) 8.8% C) 12.4% D) 10.3% E) 9.1%
A stock has a beta of 1.6 and an expected return of 16%. A risk-free asset currently earns 5%. If a portfolio of the two assets has a beta (βp) of 0.6, what are the portfolio weights? (wS = 37.5%, wRF = 62.5%) If a portfolio of the two assets has an expected return of 11%, what is its beta? (βp= 0.873)
(2*5) Consider a market with many risky assets and a risk-free security. Asset’s returns are not perfectly correlated. All the CAPM assumptions hold and the market is in equilibrium. The risk-free rate is 5%, the expected return on the market is 15%. Mr. T and Mrs. R are two investors with mean-variance utility functions and different risk-aversion coefficients. They both invest into efficient portfolios composed of the market portfolio and the risk-free security. Mr. T’s portfolio has an expected return...
show work
10. You own a portfolio with 40% invested in a risk-free asset, 20% in stock A with a beta of 1.7 and 40% in stock B. Your portfolio has the same expected return as the market portfolio. What is the beta of stock B? (The risk-free rate is 5%). a. 0.43 b. 1.00 c. 1.65 d. 1.85 e. 2.75
A stock has a beta of 1.23 and an expected return of 12.1 percent. A risk-free asset currently earns 3.95 percent Required: (a) What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return (b) If a portfolio of the two assets has a beta of 0.83, what are the portfolio weights? (Do not round...
5.2 Risk premium Consider a portfolio consisting of the following three stocks: The volatility of the market portfolio is Correlation with the Market Portfolio 0.35 0.52 0.54 Volatility 13% 28% 11% Portfolio weight 0.26 0.29 0.45 EC Cor Green Midget Alive And Well 10% and it has an expected return of 8%. The risk-free rate is 3% 1. Compute the beta and 2. Using your answer from question (1), calculate the expected return of the portfolio 3. What is the...
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.61 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? Answer to two decimals. Thank you !!