A stock that you are interested in has a beta of 5. The total value of your portfolio is $200,000 and you decide to invest another $50,000 in this stock. a. The current beta of your portfolio is 2.5. What will be the beta of your new portfolio? b. The risk-free rate is 6% and the expected return on the market is 15%. What is the expected return on your new portfolio?

A stock that you are interested in has a beta of 5. The total value of your portfolio is $200,000 and you decide to invest another $50,000 in this stock. a. The current beta of your portfolio is 2.5. What will be the beta of your new portfolio? b. The risk-free rate is 6% and the expected return on the market is 15%. What is the expected return on your new portfolio?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 15MC

See similar textbooks

Similar questions

You want your portfolio beta to be 1.30. Currently, your portfolio consists of $100 invested in stock A with a beta of 1.4 and $300 in stock B with a beta of .6. You have another $400 to invest and want to divide it between an asset with a beta of 1.8 and a risk-free asset. How much should you invest in the risk-free asset?
You are considering adding Gamma stock to your portfolio. What is the required return on the stock if it has a beta of 0.9, the risk-free rate is 3%, and the expected return on the market is 10%? If the expected return on the investment is 9%, would you add Gamma stock to your portfolio?
You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 24% .Suppose Stock X has an expected return of 18% and beta of 1.4, and Stock Y has an expected return of 12% and beta of 0.8 %. 1. How much money will you invest in Stock Y? 2. What is the beta of your portfolio?
Your client decides to invest $60 million in Flama and $40 million in Blanca stocks. The risk-free rate is 2% and the market risk premium is 4%. The beta of the Flama Stock is 2, and the beta of the Blanca stock is 4. What are the weights for this portfolio? What is the portfolio beta? What is the required return of the portfolio?
A stock that you interested in has a beta of 5.the total value of your portfolio is $200000and you decide to invest another $50000in the stock. The current beta of your portfolio is2.5what will be the beta of your new portfolio? The risk free rate is 6%and the expected return on market is 15%what is the expected return on your new portfolio?
You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 13 percent. If Stock X has an expected return of 31 perCent and a beta of 1.80, and Stock Y has an expected return of 20 percent and a beta of 1.3 .how much money will you invest in Stocky? How do you interpret your answer? What is the beta of your portfolio?
You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its net are summarized below. Calculate the beta of the portfolio and use the capital asset pricing model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 18% and that the risk-free rate is 6%. Stock A, Investment = $188,000, Beta=1.50, Stock B, Investment = $282,000, Beta =0.50, Stock C, Investment = $470,000, Beta = 1.30 Beta of the portfolio ? Expected rat of return ? %
An investor is forming a portfolio by investing $50,000 in stock A which has a beta of 2.40, and $50,000 in stock B which has a beta of 0.60. The return on the market is equal to 8% and treasure bonds have a yield of 3% (rRF). What’s the portfolio beta? 0.60 1.30 1.50 1.80 Using the information in Question 41, calculate the required rate of return on the investor’s portfolio 11.0% 15.0% 12.0% 10.5% A retail store is offering a diamond ring for sale for 36 months at $128 per month. The retail price of the ring is $4,000. What is the interest rate on this offer? 9.43% 11.20% 11.98% 12.11%
You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock Investment Beta A $222,000 1.41 B 333,000 0.53 C 555,000 1.30 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 12 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) Beta of the portfolio enter the beta rounded to 3 decimal places Expected rate of return enter percentages rounded to 2 decimal places %
You have $19,878 to invest in a stock portfolio. Your choices are Stock "X" with an expected return of 12.5% and Stock Y with an expected return of 8.24%. If your goal is to create a portfolio with an expected return of 11.92%, how much money will you invest in Stock X? State of Economy Probability of State of Economy Return Stock A Return Stock B Return Stock C Boom 0.20 19.41% 20.65% 29.51% Good 0.35 8.08% 10.59% 13.88% Poor 0.40 5.53% 3.23% 5.04% Bust 0.05 1.77% 1.47% 1.16% Your portfolio is invested 23% each in stock A and C and the remaining in stock B. What is the expected return of the portfolio? NOTE: Enter the PERCENTAGE number rounding to two decimals. If your decimal answer is 0.034576, your answer must be 3.46. DO NOT USE the % sign A Stock has a beta of 1, the expected return on the market is 17.72%, and the risk-free rate is 4.85%. What must the expected return on this stock be? NOTE: Enter the PERCENTAGE number rounding to two…
A stock that you are interested in has a beta of 5. The total value of your portfolio is $200000 and you decide to invest $50000 in the stock. The current beta of your portfolio is 2.5. What will be the beta of your new portfolio.
You are analyzing a stock that has a beta of 1.19. The risk-free rate is 4.4% and you estimate the market risk premium to be 6.6%. If you expect the stock to have a return of 9.8% over the next year, should you buy it? Why or why not? The expected return according to the CAPM is%. (Round to two decimal places.) Should you buy the stock? (Select the best choice below.) O A. Yes, because the expected return based on the beta is equal to or less than the return on the stock. O B. No, because the expected return based on the beta is greater than the return on the stock.