ZuoTi.Pro
Question

2 risky Stocks A and B are weighted 20% and 80% respectively. If the beta for...

2 risky Stocks A and B are weighted 20% and 80% respectively. If the beta for stock A is 1.2 what are the betas for the market portfolio and stock B (assume also a risk free stock)

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Beta for risk free assets is always 0 , So beta of stock B is zero.it has been assumed that stock B is a risk free stock, because the beta is not given of stock B and it is also said to assume one of the stock as risk free stock.

Beta of market portfolio would be weighted average beta of the stocks present in the market portfolio.

beta of market portfolio = (beta of stock A × weight of stock A into portfolio)+(beta of stock B×weight of stock B into portfolio)

= (1.2×20%)+(0×80%)

= .24+0

= .24

Hence the beta of market portfolio would be .24

0 0
Add a comment
Know the answer?
Add Answer to:
2 risky Stocks A and B are weighted 20% and 80% respectively. If the beta for...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 2. Consider a market with only two risky stocks, A and B, and one risk-free asset....

    2. Consider a market with only two risky stocks, A and B, and one risk-free asset. We have the following information about the stocks. Stock A Stock B Number of shares in the market 600 400 Price per share $2.00 $2.50 Expected rate of return 20% Standard dev.of return 12% Furthermore, the correlation coefficient between the returns of stocks A and B is PABWe assume that the returns are annual, and that the assumptions of CAPM hold. (a) (4 points)...

  • Calculating Portfolio Betas You own a stock portfolio invested 15 percent in Stock Q, 25 percent...

    Calculating Portfolio Betas You own a stock portfolio invested 15 percent in Stock Q, 25 percent in Stock R, 40 percent in Stock S, and 20 percent in Stock T. The betas for these four stocks are . 78, 87, 1.13, and 1.45, respectively. What is the portfolio beta? Calculating Portfolio Betas You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.29 and the total portfolio is...

  • 6. (Simpleland) In Simpleland there are only two risky stocks, A and B, whose details are...

    6. (Simpleland) In Simpleland there are only two risky stocks, A and B, whose details are listed in Table 7.4 TABLE 7.4 Details of Stocks A and B Number of shares outstanding Price per share Expected rate of return Standard deviation of return Stock A 100 150 $1.50 $2.00 15% 12% 15% 9% Stock B Furthermore, the correlation coefficient between the returns of stocks A and B is PAB = There is also a risk-free asset, and Simpleland satisfies the...

  • 4. XYZ's retirement account has $350.000 in corporate bonds, $100,000 in growth stocks and S50,000 in...

    4. XYZ's retirement account has $350.000 in corporate bonds, $100,000 in growth stocks and S50,000 in 10-year treasury bonds. The expected returns for these asset classes are 5%, 20%, and 2% respectively. Also, their betas are 0.8 for the corporate bond, 2.0 for the growth stocks and 0.3 for the 10-year treasury security. a. Calculate the portfolio expected return and beta for the retirement portfolio (14 pts) b. The expected return on an asset is 7% and its beta is...

  • You are forming an equally weighted portfolio of stocks. Many stocks have the same beta of...

    You are forming an equally weighted portfolio of stocks. Many stocks have the same beta of 0.84 for Factor 1 and the same beta of 1.69 for Factor 2. All stocks also have the same expected return of 11 percent. Assume a two-factor model describes the return on each of these stocks. a) Write the equation of the returns on your portfolio if you place only five stocks in it. b) Write the equation of the returns on our portfolio...

  • 1. The returns on stocks A and B are 12% and 16%, respectively. The SD of...

    1. The returns on stocks A and B are 12% and 16%, respectively. The SD of the returns on stocks A and B are 31% and 12%, respectively. The beta of A is 0.7, while that of B is 1.4. The risk free rate over the period was 5%, the market's average return was 13%. a. Calculate the Sharpe ratio for each stock. b. Calculate the alpha for each stock. c. Calculate the Treynor ratio for each stock. d. Which...

  • QUESTION 17 You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta...

    QUESTION 17 You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 126 and the total portfolio is equally as risky as the market. Required: What must the beta be for the other stock in your portfolio? (Round your answer to 2 decimal places leg.32.16).) Beta: QUESTION 18 A stock has a beta of o92, the expected return on the market is 103 percent, and the risk-free rate is...

  • The universe of available securities includes two risky stocks A and B, and a risk-free asset....

    The universe of available securities includes two risky stocks A and B, and a risk-free asset. The data for the universe are as follows: Assets Expected Return Standard Deviation Stock A 6% 25% Stock B 12% 42% Risk free 5% 0 The correlation coefficient between A and B is -0.2. The investor maximizes a utility function U=E(r)−σ2 (i.e. she has a coefficient of risk aversion equal to 2). Assume that to maximize his utility when there is no available risk-free...

  • Two stocks, A and B, have beta coefficients of 0.8 and 1.4, respectively. If the expected...

    Two stocks, A and B, have beta coefficients of 0.8 and 1.4, respectively. If the expected return on the market is 10 percent and the risk-free rate is 5 percent, what is the risk premium associated with each stock?

  • Stocks A and B have the following probability distributions of expected future returns: Probability A B...

    Stocks A and B have the following probability distributions of expected future returns: Probability A B 0.1 (11 % ) (23 %) 0.2 6 0 0.4 15. 23 0.2 23 27 0.1 39 48 a. Calculate the expected rate of return, rB, for Stock B (rA two decimal places. 14.60 % . ) Do not round intermediate calculations. Round your answer to 11 % b. Calculate the standard deviation of expected returns, aA, for Stock A (oe = 18.66 %...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT