Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Your investment club has only two stocks in its portfolio. $30,000 is invested in a stock with a beta of 0.8, and $40,000 is invested in a stock with a beta of 2.1. What is the portfolio's beta? round your answer to two decimal places.
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- Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 68 20 Aggressive Stock 2.0% 32 Defensive Stock 5.0% 15 a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A Beta D b. What is the expected rate of return on each stock if the market return is equally likely to be 6% or 20% ? (Round your answers to 2 decimal places.) Rate of return on A Rate of return on Darrow_forwardYou invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: 0.8, -1.3, 0.95, 1.2, and 1.4. The risk-free return is 3% and the market return is 7%. a. Compute the beta of the portfolio. b. Compute the required return of the portfolio.arrow_forwardSuppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.95. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use the proceeds to buy another stock with a beta of 0.80. What would your portfolio's new beta be? Do not round intermediate calculations. Round your answer to two decimal places.arrow_forward
- A stock has a required return of 7%; the risk- free rate is 3.0%; and the market risk premium is 3%. What is the stock's beta? Round answer to two decimal places.arrow_forward8.2 An individual has $20,000 invested in a stock with a beta of 0.8 and another $55,000 invested in a stock with a beta of 1.8. If these are the only two investments in her portfolio, what is her portfolio's beta? Do not round intermediate calculations. Round your answer to two decimal places.arrow_forwardYou 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 $218,000 1.50 B 327,000 0.60 C 545,000 1.18 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 17 percent and that the risk-free rate is 8 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 Expected rate of return %arrow_forward
- Consider the following information: State Probability Stock A Stock B Stock C Boom 0.32 0.09 -0.01 0.01 Bust 0.68 -0.05 0.28 0.03 What is the expected return of a portfolio that has invested $9,981 in Stock A, $6,817 in Stock B, and $2,123 in Stock C? (Hint: calculate weights of each stock first). Enter the answer with 4 decimals (e.g. 0.1234).arrow_forwardYour portfolio is comprised of 30 percent of Stock X, 20 percent of Stock Y, and 50 percent of Stock Z. Stock X has a beta of 1.05, Stock Y has a beta of 0.80, and Stock Z has a beta of 1.43. What is the beta of your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)arrow_forwardYou own a portfolio that is 25% invested in Stock X, 40% in Stock Y, and 35% in Stock Z. The expected returns on these three stocks are 10%, 13%, and 15%, respectively. What is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected returnarrow_forward
- Give typing answer with explanation and conclusionarrow_forwardYou own $14,755 of Olympic Steel stock that has a beta of 3.14. You also own $19,295 of Rent-a-Center (beta = 1.61) and $22,700 of Lincoln Educational (beta = 0.62). What is the beta of your portfolio? Note: Round your answer to 2 decimal places. Portfolio betaarrow_forwardYou 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 $218,000 1.50 B 327,000 0.60 C 545,000 1.18 D 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 17 percent and that the risk-free rate is 8 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 Expected rate of return %arrow_forward
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