A stock has a beta of 1.8 and an expected return of 13 percent. A risk-free asset currently earns 3.2 percent. If a portfolio of the two assets has a beta of 3.6, what are the portfolio weights? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign. Round your answers to the nearest whole number, e.g., 32.)
Q: A stock has an expected return of 12.5 percent and a beta of 1.16, and the expected return on the…
A: Expected return of stock (Er) = 0.125 (12.5%) Beta (b) = 1.16 Expected return on the market (Rm) =…
Q: Stock R has a beta of 1.9, Stock S has a beta of 0.35, the expected rate of return on an average…
A: Expected Rate of return on average stock = Risk free Rate + beta * Market risk premium 9% = 7% + 1 *…
Q: A stock has an expected return of 16.5 percent, its beta is 1.50, and the risk-free rate is 4.5…
A: Given that the expected return on a stock is 16.5%, risk free rate is 4.5% and the beta is 1.50, we…
Q: A stock has a beta of 1.38, the expected return on the market is 10 percent, and the risk- free rate…
A: Expected return using CAPM model can be calculated using following formula :- Expected return = Risk…
Q: If the risk free rate is 2 %, the expected return on the market portfolio is 12% and the beta of…
A: Financial statements are statements which states the business activities performed by the company .…
Q: Stock R has a beta of 2.0, Stock S has a beta of 0.45, the requiredreturn on an average stock is…
A: Calculation of difference between riskier stock and less risky stock: Answer: The difference between…
Q: Consider the following information for stocks A, B, and C. The returns on the three stocks are…
A: The market risk premium is the return over risk-free return received by the investor for bearing an…
Q: A stock has a beta of 1.07, the expected return on the market is 10.1 percent, and the risk- free…
A: Beta = 1.07 Market return = 10.1% Risk free rate = 4.9%
Q: The standard deviation of stock A's returns (σA) is 34%, and the standard deviation of the market…
A: Standard deviation of stock A's returns (σA) is 34% Standard deviation of the market portfolio (σM)…
Q: Stocks A and B have the following probability distributions of expected future returns: Probability…
A: Since question involves multiple subparts , we will answer 1st sub 3 parts for you as per prescribed…
Q: A stock has a beta of 1.22, the expected return on the market is 12 percent, and the risk- free rate…
A: given, beta = 1.22 expected market return ( rm) = 12% risk free rate ( rf) = 4%
Q: Stock A has an expected return of 10% and a standard deviation of 20%. Stock B has an expected…
A: Expected return of B = 13% Risk free rate = 5% Market risk premium = 6%
Q: Suppose the risk-free return is 7.9% and the market portfolio has an expected return of 11.5% and a…
A: Risk free rate = 7.9% Stock beta = 0.77 Market return = 11.5%
Q: A stock has an expected return of 15.6 percent, the risk-free rate is 6.2 percent, and the market…
A: The beta of the stock can be calculated with the help of CAPM equation.
Q: Consider the following information for stocks A, B, and C. The returns on the three stocks are…
A: Given is the information for the stocks A, B, and C. Stock Expected Return Standard Deviation…
Q: stock has an expected return of 12.1 percent and a beta of 1.17, and the expected return on the…
A: Capital asset pricing model (capm) describe the relationship between systematic risk and return of…
Q: A stock has a beta of 1.10, the expected return on the market is 12 percent, and the risk-free rate…
A: Given that the expected return on the market is 12%, risk free rate is 3.6% and the beta is 1.10, we…
Q: Stock A has a beta of 0.7, whereas Stock B has a beta of 1.3. Portfolio P has 50% invested in both A…
A: According to CAPM: required return = risk free rate+beta×market risk premium
Q: A stock has a beta of 1.1, the expected return on the market is 10.4 percent, and the risk-free rate…
A: Expected return = Risk free rate+Beta*(Market return-Risk free rate) Where Risk free rate = 4.75%…
Q: A stock has an expected return of 12.4 percent, the risk-free rate is 6.5 percent, and the market…
A: According to CAPM : beta of stock = ( expected return - risk free rate)/market risk premium
Q: A stock has an expected return of 14 percent, a beta of 1.65, and the expected return on the market…
A: Given that the expected return on a stock is 14%, expected return on the market is 11.2% and the…
Q: A stock has a beta of 0.65, the expected return on the market is 15%, and the risk- free rate is 8%.…
A: In the given problem we require to calculate the expected return on stock: According to CAPM i.e.…
Q: Suppose Intel's stock has an expected return of 26% and a volatility (standard deviation) of 50%,…
A: Here, Expected Return of IS is 26% Standard Deviation of IS is 50% Expected Return of CC is 6%\…
Q: The two stocks in your portfolio, X and Y, have independent returns, so the correlation between…
A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.
Q: A stock has an expected return of 14 percent, the risk-free rate is 6 percent, and the market risk…
A: The beta of the stock can be calculated as per CAPM
Q: A stock has an expected return of 15.6 percent, the risk-free rate is 6.2 percent, and the market…
A: Information Provided: Expected Return = 15.6% Risk-free rate = 6.2% Market Risk Premium = 7.7%
Q: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate ofreturn on an average…
A: The riskiness of security is measured by "Beta". Beta measures the volatility of the stock with…
Q: You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a…
A: Formula Portfolio beta = (Weight of stock 1*Beta of stock 1)+(Weight of stock 2*Beta of stock 2)…
Q: If a portfolio of the two assets has a beta of .99, what are the portfolio weights? (Do not round…
A: Hi. Since there is no information given regarding the beta of stock, we are randomly assuming the…
Q: stock has a beta of 1.14, the expected return on the market is 10.8 percent, and the risk-free rate…
A: Beta=1.14 Return is market =10.8% Risk free rate =4.55%
Q: Stock R has a beta of 2.0, Stock S has a beta of 0.35, the required return on an average stock is…
A: Stock R beta (BR) = 2.0 Stock S beta (BS) = 0.35 Risk free rate (RF) = 3% Market rate of return (RM)…
Q: Stock R has a beta of 1.7, Stock S has a beta of 0.8, the required return on an average stock is…
A: The question is based on the concept of the capital asset pricing model (CAPM). CAPM explains the…
Q: The beta of M Simon Inc., stock is 1.6, whereas the risk-free rate of return is 0.06. If the…
A: A model that represents the relationship of the required return and beta of a particular asset is…
Q: Stock R has a beta of 1.5, Stock S has a beta of 0.85, the required return on an average stock is…
A: Given, beta(stock R)=1.5 beta(stock S)=0.85 Average stock=9% Rate of return=3%
Q: Stock X has a beta of 0.6, while Stock Y has a beta of 1.4. Which of the following statements is…
A: Beta is a statistical measure which measures the risk involved in a particular stock.
Q: A stock has a beta of 1.2, the expected return on the market is 9 percent, and the risk-free rate is…
A: We need to use CAPM to calculate expected return Expected return =Risk free rate +Beta(Market return…
Q: A stock has an expected return of 12.7 percent and a beta of 1.18, and the expected return on the…
A: Given information: Expected return is 12.7% Beta value is 1.18 Expected return on market is 11.7%
Q: A stock has a beta of 1.4 and an expected return of 12.7 percent. If the risk-free rate is 4.9…
A: Following details are given to us in the question : Beta = 1.4 Expected Return (ER) = 12.7% Risk…
Q: Stock R has a beta of 1.9, Stock S has a beta of 0.45, the required return on an average stock is…
A: The Required Rate of Return is computed by using CAPM as follows: Required Rate of return =…
Q: A stock has an expected return of 14.5 percent, the risk-free rate is 5.65 percent, and the market…
A: Equation of CAPM (capital asset pricing model) equation can be used to find the beta of the stock:…
Q: A stock has a beta of 1.13, the expected return on the market is 10.7 percent, and the risk-free…
A: Beta (B) = 1.13 Market return (MR) = 10.7% Risk free rate (RF) = 4.6%
Q: A stock has a beta of 1.04, the expected return on the market is 11.75, and the risk-free rate is…
A: A stock is a financial security issued by companies to raise equity funds from the primary market.…
Q: Required Rate of Return Stock R has a beta of 1.4, Stock S has a beta of 0.45, the expected rate of…
A: Beta is one of the measure of volatility or risk of the stock. More beta means more risk and less…
Q: A stock has a beta of 1.14, the expected return on the market is 10.8 percent, and the risk- free…
A: The expected return of the stock can be calculated with the help of CAPM equation
Q: A stock has a beta of 1.04, the expected return on the market is 10 percent, and the risk- free rate…
A: Cost of equity: It can be defined as the rate of return that is provided by the company to its…
Q: The data on the expected return of 2 stocks (M and C) along with the economic conditions and their…
A: Expected return of a stock is the minimum rate of return that an investor expects from the security…
Q: Stocks A and B have the following probability distributions of expected future returns: Probability…
A: Here: Probability A B 0.1 (11%) (38%) 0.2 5% 0% 0.5 13% 21% 0.1 18% 26% 0.1 31% 36%
Q: A stock has a beta of 1.32 and an expected return of 12.8 percent. The risk-free rate is 3.6…
A: The slope of SML is Return of Market minus Rf. Note: Rf= Risk-free Rate SML= Security Market Line
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
A stock has a beta of 1.8 and an expected return of 13 percent. A risk-free asset currently earns 3.2 percent. If a portfolio of the two assets has a beta of 3.6, what are the portfolio weights? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign. Round your answers to the nearest whole number, e.g., 32.)
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
- Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.A stock has a beta of 1.26 and an expected return of 12.4 percent. A risk-free asset currently earns 4.1 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of .86, what are the portfolio weights? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.) c. If a portfolio of the two assets has an expected return of 11.6 percent, what is its beta? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. If a portfolio of the two assets has a beta of 2.46, what are the portfolio weights? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616.)A stock has a beta of 1.39 and an expected return of 13.7 percent. A risk-free asset currently earns 4.75 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. If a portfolio of the two assets has a beta of .99, what are the portfolio weights? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 1616.) c. If a portfolio of the two assets has an expected return of 12.9 percent, what is its beta? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. If a portfolio of the two assets has a beta of 2.59, what are the portfolio weights? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 1616.) a. Expected return b. Weight of stock Weight of risk-free…
- A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete and correct. Expected return 6.50 % b. If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Stock Risk-free asset Portfolio Weight % %If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) | Slope of the line %You own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.16 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Beta
- Asset W has an expected return of 12.6 percent and a beta of 1.25. If the risk-free rate is 4.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Leave no cells blank be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your expected returns as a percent rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places, e.g., 32.161.) Percentage of Portfolio in Asset W 0% 25 50 75 100 125 150 - Slope of the line Portfolio Expected Return % % % % % % % If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Portfolio Beta %Asset W has an expected return of 8.8 percent and a beta of .9O. If the risk-free rate is 2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations. Enter your expected returns as a percent rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places, e.g., 32.161.) Answer is complete and correct. Percentage of Portfolio in Asset W Portfolio Expected Portfolio Return Beta % 2.60 % 25 4.15 % 0.225 50 5.70 % 0.450 75 7.25 % 0.680 100 8.80 % 0.900 125 10.35 % 1.130 150 11.90 % 1.350 you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) If X Answer is not complete. Slope of the lineA stock has a beta of 1.22 and an expected return of 12 percent. A risk-free asset currently earns 3.9 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. b. If a portfolio of the two assets has a beta of .82, what are the portfolio weights? Note: Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. c. If a portfolio of the two assets has an expected return of 11.2 percent, what is its beta? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. d. If a portfolio of the two assets has a beta of 2.42, what are the portfolio weights? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 4 decimal places, e.g., .1616. a. Expected return b. Weight of stock Weight of…
- A stock has a beta of 1.8 and an expected return of 13 percent. A risk-free asset currently earns 3.2 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % b. If a portfolio of the two assets has a beta of .99, what are the portfolio weights? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Weight of stock Risk-free weight c. If a portfolio of the two assets has an expected return of 9 percent, what is its beta? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) Beta d. If a portfolio of the two assets has a beta of 3.6, what are the portfolio weights? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign. Round your answers to…Asset W has an expected return of 13.4 percent and a beta of 1.6. If the risk-free rate is 5.0 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations and enter your expected return answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 3 decimal places, e.g., 32.161.) Asset W has an expected return of 13.4 percent and a beta of 1.6. If the risk-free rate is 5.0 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations and enter your expected return answers as a percent rounded to 2 decimal places, e.g., 32.16. Round your beta answers to 3 decimal places, e.g., 32.161.)Stock Y has a beta of 1.40 and an expected return of 15.2 percent. Stock Z has a beta of .85 and an expected return of 11.3 percent. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Risk-free rate %