Question

e choice list. One double-sided A4 size crib sheet and a financial calculator are test. Question 19 1 pts Beta of Assets A, B, C, and D are 1.2, 1.8, 2.4 and 0.8 respectively. You form a portfolio with equal weights on A, B, C, and D. The risk-free rate is 2%, and the expected return of the market portfolio is 10%. Find out the expected return of your portfolio according to the CAPM. 14.4.% 12% 17.5% 18.2% 12.4% • Previous Next > Not saved Submit Qui MAY LILL

Answer 1

Ans is 14.4%
с р 1 Market Return 2. Risk free rate в 10% 2% Beta 4 Calculation of beta portfolio 5 Asset 6 Asset A 7 Asset B 8 Asset C 9 Asset D 10 1.8/ 0.45 Weights Beta *Weight 1.2 0.25 0.3 0.25 2.4 0.25 0.6 0.8 0.25 0.2 Beta potfolio 1.55 11 12 13 14 As per CAPM 15 k= Risk free rate + Porfolio Beta*(Market Return - Risk free rate) 16 k=Rf +Beta*(Rm-Rf) 17 14.4% 18 19 Hence ,expected return of portfolio is 14.4% 20.

в 1 Market Return 2 Risk free rate 0.1 0.02 3 2.4 0.8 4 Calculation of beta portfolio 5 Asset Beta Weights Beta *Weight 6 Asset A 1.2 =100%/4 =B6*C6 7 Asset B 1.8 = 100%/4 =B7*C7 8 Asset C = 100%/4 =B8C8 9 Asset D =100%/4 =B9*C9 10 Beta potfolio =SUM(D6:09) 11 12 13 14 As per CAPM 15 k= Risk free rate + Porfolio Beta*(Market Return - Risk free rat 16 k=Rf +Beta*(Rm-Rf) 17 =B2+D10*(B1-B2) 18 19 Hence ,expected return of portfolio is 14.4% 20

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