Suppose you form a portfolio consisting of $31,000 invested in a mutual fund with beta of 1.6, $18,000 invested in $19,000 invested in an index fund with the same beta as the entire market. Expected market risk premium is 6.3% Risk-free rate is 0.8% What the expected return of this portfolio according to the CAPM? a. 6.9% Ob. 6.6% O c. 7.2% d. 9.1% e. 5.8%

Suppose you form a portfolio consisting of $31,000 invested in a mutual fund with beta of 1.6, $18,000 invested in $19,000 invested in an index fund with the same beta as the entire market. Expected market risk premium is 6.3% Risk-free rate is 0.8% What the expected return of this portfolio according to the CAPM? a. 6.9% Ob. 6.6% O c. 7.2% d. 9.1% e. 5.8%

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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2
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Quantitative Problem: You are holding a portfolio with the following investments and betas: Stock Dollar investment Beta A $300,000 1.2 B 200,000 1.6 C 400,000 0.75 D 100,000 -0.35 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places.

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