A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset currently earns 3.85 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 .81, 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 11.1 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 2.41, 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 risk-free asset c. Beta d. Weight of stock Weight of risk-free %
A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset currently earns 3.85 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 .81, 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 11.1 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 2.41, 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 risk-free asset c. Beta d. Weight of stock Weight of risk-free %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Already have answers for A-C, just need D. Thank you! :)
Transcribed Image Text:A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset
currently earns 3.85 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 .81, 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 11.1 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 2.41, 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 risk-free asset
c. Beta
d. Weight of
stock
Weight of risk-free
%
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