Question

Your answer is incorrect. Try again. You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock А Beta 1.52 Investment $196,000 294,000 490,000 0.55 1.34 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 18 percent and that the risk-free rate is 9 percent. (Round beta answer to decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.759.) Beta of the portfolio 1.057 Expected rate of return 16,46 Click if you would like to show Work for this question: Open Show Work LINK TO TEXT LINK TO TEXT By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor Question Attempts: 1 of 3 used REPEAT QUESTION WITH NEW VALUES Earn Maximum Points available only if you answer this question correctly in two attempts or less

Answer 1

CAPM:-

Stock Investment Beta Inv*beta Weight beta*weight A $ 196,000.00 1.52 $ 297,920.00 | 0.266901 0.405689201 B $ 294,000.00 0.55 $ 161,700.00 0.144864 0.079675154 C $ 490,000.00 1.34 $ 656,600.00 0.588235 0.788235294 $ 1,116,220.00 1.274

=Rf rate+beta*risk premium

=9%+1.274*(18%-9%)

=20.46%