Consider a portfolio consisting of the following three stocks: The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3% a. Compute the beta and expected return of each stock. b. Using your answer from part a, calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part c, calculate the expected return of the portfolio and verify that it matches your answer to part b. a. Compute the beta and expected return of each stock. (Round to two decimal places.) Correlation Beta Portfolio Weight Volatility (A) (B) (C) (D) 0.29 10% 0.34 0.41 21% 0.61 0.30 13% 0.58 HEC Corp Green Widget Alive And Well Expected Return (E) 1% % %

Consider a portfolio consisting of the following three stocks: The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3% a. Compute the beta and expected return of each stock. b. Using your answer from part a, calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part c, calculate the expected return of the portfolio and verify that it matches your answer to part b. a. Compute the beta and expected return of each stock. (Round to two decimal places.) Correlation Beta Portfolio Weight Volatility (A) (B) (C) (D) 0.29 10% 0.34 0.41 21% 0.61 0.30 13% 0.58 HEC Corp Green Widget Alive And Well Expected Return (E) 1% % %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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