1. A portfolio with a beta of .90 contains 3 stocks as outlined below. What is the beta for Stock C?
Stock | Market Value | Beta |
A | 20,000 | 1.07 |
B | 15,000 | 0.70 |
C | 10,000 | X |
A. 0
C. 0.71
C. 0.86
D. 1
E. 1.20
2. An investment earned the following annual returns. What is the average annualized compounded return?
Year | Return |
1 | -1.50% |
2 | -2.63% |
3 | -3.49% |
4 | -4.50% |
5 | -6.00% |
6 | 17.50% |
A. -.10%
B. -.40%
C. -.48%
D. -13.38%
1)
beta of portfolio = weighted average beta
=>
0.9 = (20000/45000) * 1.07 + (15000/45000) * 0.7 + (10000/45000) * x
=>
x = 0.86
choose C)
2)
Annualized return = [ (1-0.015) * (1-0.0263) * (1-0.0349) * (1-0.045) * (1-0.06) * (1+0.175) ]^(1/6) - 1
= -0.40%
hence choose B)
1. A portfolio with a beta of .90 contains 3 stocks as outlined below. What is the beta for Stock C? Stock Market Val...
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