(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

(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

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 6P

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