Homework Answers
The beta of the market portfolio is 1 .
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio, compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates an asset's expected return based on its beta and expects market returns.
It should be exactly equal to 1.
Market portfolio indicates all assets in the market with a weighted aggregate.
Beta indicates the portfolio's market risk; it shows how the market moves with the risk factor.
Although stock A has a higher beta (highly volatile), stock B must have a lower beta, although there are ups and downs in the market.
The aggregate of the whole market gives exactly 1 beta.
Portfolio Returns. Suppose MegaChip has a beta of 1.3, whereas Littlewing stock has a beta of...
Portfolio Returns. Suppose MegaChip has a beta of 1.3, whereas Littlewing stock has a beta of .7. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10% according to CAPM. What is the expected return of MegaChip stock? (4 points) What is the expected return of Littlewing stock? (4 points) What is the beta of a portfolio of 60% MegaChip and 40% Littlewing stock? (4 points) What is the expected return of a...
Expected return of a portfolio using beta. The beta of four stocks-G, H, I, and J-are...
Expected return of a portfolio using beta. The beta of four stocks-G, H, I, and J-are 0.47,0.86, 1.08, and 1.56, respectively and the beta of portfolio 1 is 0.99, the beta of portfolio 2 is 0.86, and the beta of portfolio 3 is 1.12. 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 4.5 % Trisk-froe rate ) and a market premium of...
Expected Portfolio Return Beta 22 0.8 A Market 173 1.0 D) Expected Portfolio Return Beta 30.28 1.8 A Market 198 1.0 If...
Expected Portfolio Return Beta 22 0.8 A Market 173 1.0 D) Expected Portfolio Return Beta 30.28 1.8 A Market 198 1.0 If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5% A) Expected Portfolio Return Beta 198 0.8 Market 198 1.0 B) Expected Standard Return Deviation Portfolio 228 88 A Market 17B 168
Expected return of a portfolio using beta. The beta of four stocks—G, H, I, and J—are...
Expected return of a portfolio using beta. The beta of four stocks—G, H, I, and J—are 0.44, 0.75, 1.18, and 1.58, respectively and the beta of portfolio 1 is 0.99, the beta of portfolio 2 is 0.83, and the beta of portfolio 3 is 1.14. 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% (risk-free rate) and a market premium of 10.0%...
Expected return of a portfolio using beta. The beta of four stocks-G, H, I, and J...
Expected return of a portfolio using beta. The beta of four stocks-G, H, I, and J are 0.44, 0.78, 1.11, and 1.67, respectively and the beta of portfolio 1 is 1.00, the beta of portfolio 2 is 0.83, and the beta of portfolio 3 is 1.15. 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% (risk-free rate) and a market premium of...
1. A beta coefficient of +1 represents an asset that ________. A. has a higher expected return than the market portfolio...
1. A beta coefficient of +1 represents an asset that ________. A. has a higher expected return than the market portfolio B. has the same expected return as the market portfolio C. has a lower expected return than the market portfolio D. is unaffected by market movement 2. A beta coefficient of +1 represents an asset that ________. A. has a higher expected return than the market portfolio B. has the same expected return as the market portfolio C. has...
Expected return of a portfolio using beta. The beta of four stocks—G, H, I, and J—are...
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%...
(LGI0-3) 10-22 Portfolio Beta You own $7,000 of Human Genome stock that has a beta of...
(LGI0-3) 10-22 Portfolio Beta You own $7,000 of Human Genome stock that has a beta of 3.5. You also own $8,000 of Frozen Food Express (beta = 1.6) and $10,000 of Molecular Devices (beta 0.4). What is the beta of your portfolio? (LG10-3) 10-28 Portfolio Beta and Required Return You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 12 percent and the risk-free rate is 3.5 percent,...
Which one of the following portfolios will have a beta of one?
Which one of the following portfolios will have a beta of one? 1) A portfolio with a zero variance of returns 2) No portfolio can have a beta of zero. 3) A portfolio comprised solely of U. S. Treasury bills 4) A portfolio that is equally as risky as the overall market 5) A portfolio that consists of a single stock
Stock A has a market beta of 0.8 and a required rate of return of 6%....
Stock A has a market beta of 0.8 and a required rate of return of 6%. The return on the overall stock market is 7%. [Show the work leading to your answers] a. Determine the risk-free rate, rRF. b. Assume that the overall market return increases to 10% and that Stock A’s beta and the riskfree rate remain unchanged. What is Stock A’s new required return after the change in the market return? c. The overall market return remains at...
Expected return of a portfolio using beta. The beta of four stocks-G, H, I, and J-are 0.47,0.86, 1.08, and 1.56, respectively and the beta of portfolio 1 is 0.99, the beta of portfolio 2 is 0.86, and the beta of portfolio 3 is 1.12. 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 4.5 % Trisk-froe rate ) and a market premium of...
Expected Portfolio Return Beta 22 0.8 A Market 173 1.0 D) Expected Portfolio Return Beta 30.28 1.8 A Market 198 1.0 If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5% A) Expected Portfolio Return Beta 198 0.8 Market 198 1.0 B) Expected Standard Return Deviation Portfolio 228 88 A Market 17B 168
Expected return of a portfolio using beta. The beta of four stocks-G, H, I, and J are 0.44, 0.78, 1.11, and 1.67, respectively and the beta of portfolio 1 is 1.00, the beta of portfolio 2 is 0.83, and the beta of portfolio 3 is 1.15. 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% (risk-free rate) and a market premium of...
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%...
(LGI0-3) 10-22 Portfolio Beta You own $7,000 of Human Genome stock that has a beta of 3.5. You also own $8,000 of Frozen Food Express (beta = 1.6) and $10,000 of Molecular Devices (beta 0.4). What is the beta of your portfolio? (LG10-3) 10-28 Portfolio Beta and Required Return You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 12 percent and the risk-free rate is 3.5 percent,...
Which one of the following portfolios will have a beta of one? 1) A portfolio with a zero variance of returns 2) No portfolio can have a beta of zero. 3) A portfolio comprised solely of U. S. Treasury bills 4) A portfolio that is equally as risky as the overall market 5) A portfolio that consists of a single stock
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