(Portfolio beta and CAPM) You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings: a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest were 4.5 percent and the market risk premium were 7 percent, what rate of return would you expect to earn from each of the portfolios? a. The beta on the first portfolio is Data table Asset A B C D (Round to three decimal places.) Beta 2.30 0.90 0.55 -1.30 Portfolio Weightings First Portfolio 12% 12% 38% 38% Second Portfolio 38% 38% 12% 12% X

EBK CONTEMPORARY FINANCIAL MANAGEMENT
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Chapter8: Analysis Of Risk And Return
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(Portfolio beta and CAPM) You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings:
a. What is the beta on each portfolio?
b. Which portfolio is riskier?
c. If the risk-free rate of interest were 4.5 percent and the market risk premium were 7 percent, what rate of return would you expect to earn from each of the portfolios?
a. The beta on the first portfolio is
Data table
Asset
A
AB
C
D
(Click on the icon
(Round to three decimal places.)
Portfolio Weightings
Print
Beta
2.30
0.90
0.55
- 1.30
in order to copy its contents into a spreadsheet.)
First Portfolio
12%
12%
38%
38%
Done
Second Portfolio
38%
38%
12%
12%
I
X
Transcribed Image Text:(Portfolio beta and CAPM) You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings: a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest were 4.5 percent and the market risk premium were 7 percent, what rate of return would you expect to earn from each of the portfolios? a. The beta on the first portfolio is Data table Asset A AB C D (Click on the icon (Round to three decimal places.) Portfolio Weightings Print Beta 2.30 0.90 0.55 - 1.30 in order to copy its contents into a spreadsheet.) First Portfolio 12% 12% 38% 38% Done Second Portfolio 38% 38% 12% 12% I X
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