You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings: LOADING... . a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest were 5 percent and the market risk premium were 6 percent, what rate of return would you expect to earn from each of the portfolios? Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.20 12% 38% B 0.95 12% 38% C 0.60 38% 12% D −1.80 38% 12%

You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings: LOADING... . a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest were 5 percent and the market risk premium were 6 percent, what rate of return would you expect to earn from each of the portfolios? Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.20 12% 38% B 0.95 12% 38% C 0.60 38% 12% D −1.80 38% 12%

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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		Portfolio Weightings
Asset	Beta	First Portfolio	Second Portfolio
A	2.20		12%	38%
B	0.95		12%	38%
C	0.60		38%	12%
D	−1.80		38%	12%

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