Table 1. Average Return and Beta Stock 1 2 3 4 5 Average annual return 15% 8% 12% 50% 80% Beta 1 1.2 2.5 3 3.5 Table 2. Portfolio A information Stock 1 2 3 In...

Question

Question

Table 1. Average Return and Beta Stock 1 2 3 4 5 Average annual return 15% 8% 12% 50% 80% Beta 1 1.2 2.5 3 3.5 Table 2. Portfolio A information Stock 1 2 3 In...

Table 1. Average Return and Beta
Stock	1	2	3	4	5
Average annual return	15%	8%	12%	50%	80%
Beta	1	1.2	2.5	3	3.5


Table 2. Portfolio A information
Stock	1	2	3
Investment (million USD)

If you manage a portfolio worth $100,000,000 and you choose to invest in only stock 1, 2, and 3.

What is the minimum beta for a portfolio with return equal to 13%?

No short sales allowed.

Report the answer with 2 numbers after decimal place, say 1.51

**Please show excel formulas**

business finance

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Answer 1

Answer #1

To get the portfolio return of 13% there will be the following weightage of stocks is as follows

Stock 1 = 45%

Stock 2 = 8%

Stock 3 = 47%

Portfolio Return = 45*0.15 + 8*0.08+47*0.12 = 13 %

So

Portfolio beta = 1*45%+1.2*8%+2.5*47% = 1.721

Add a comment

Answer 2

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