Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 11, Problem 12QP
Calculating Portfolio Betas. You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.63 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.1 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio?
You have a portfolio that is equally invested in Stock F with a beta of 1.15, Stock G with a beta of 1.52, and the risk-free asset. What is the beta of your portfolio?
How do I solve this?
You form a portfolio by investing equally in four securities: stock A, stock B, the risk-free security, and the market portfolio. What is the beta of your portfolio if bA = .8 and bB = 1.2?
Chapter 11 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 11.1 - How do we calculate the expected return on a...Ch. 11.1 - Prob. 11.1BCQCh. 11.2 - What is a portfolio weight?Ch. 11.2 - How do we calculate the expected return on a...Ch. 11.2 - Is there a simple relationship between the...Ch. 11.3 - Prob. 11.3ACQCh. 11.3 - Prob. 11.3BCQCh. 11.4 - Prob. 11.4ACQCh. 11.4 - Prob. 11.4BCQCh. 11.5 - Prob. 11.5ACQ
Ch. 11.5 - Prob. 11.5BCQCh. 11.5 - Prob. 11.5CCQCh. 11.5 - Prob. 11.5DCQCh. 11.6 - Prob. 11.6ACQCh. 11.6 - Prob. 11.6BCQCh. 11.6 - How do you calculate a portfolio beta?Ch. 11.6 - True or false: The expected return on a risky...Ch. 11.7 - Prob. 11.7ACQCh. 11.7 - Prob. 11.7BCQCh. 11.7 - Prob. 11.7CCQCh. 11.8 - If an investment has a positive NPV, would it plot...Ch. 11.8 - Prob. 11.8BCQCh. 11 - What does variance measure?Ch. 11 - Prob. 11.2CCh. 11 - What is the equation for total return?Ch. 11 - Prob. 11.4CCh. 11 - Prob. 11.5CCh. 11 - By definition, what is the beta of the average...Ch. 11 - Section 11.7What does the security market line...Ch. 11 - Diversifiable and Nondiversifiable Risks. In broad...Ch. 11 - Information and Market Returns. Suppose the...Ch. 11 - Systematic versus Unsystematic Risk. Classify the...Ch. 11 - Systematic versus Unsystematic Risk. Indicate...Ch. 11 - Prob. 5CTCRCh. 11 - Prob. 6CTCRCh. 11 - Prob. 7CTCRCh. 11 - Beta and CAPM. Is it possible that a risky asset...Ch. 11 - Prob. 9CTCRCh. 11 - Earnings and Stock Returns. As indicated by a...Ch. 11 - Determining Portfolio Weights. What are the...Ch. 11 - Portfolio Expected Return. You own a portfolio...Ch. 11 - Prob. 3QPCh. 11 - Prob. 4QPCh. 11 - Prob. 5QPCh. 11 - Prob. 6QPCh. 11 - Calculating Returns and Standard Deviations. Based...Ch. 11 - Prob. 8QPCh. 11 - Prob. 9QPCh. 11 - LO1, LO2 10.Returns and Standard Deviations....Ch. 11 - Calculating Portfolio Betas. You own a stock...Ch. 11 - Calculating Portfolio Betas. You own a portfolio...Ch. 11 - Using CAPM. A stock has a beta of 1.23, the...Ch. 11 - Using CAPM. A stock has an expected return of 11.4...Ch. 11 - Using CAPM. A stock has an expected return of 10.9...Ch. 11 - Prob. 16QPCh. 11 - Using CAPM. A stock has a beta of 1.23 and an...Ch. 11 - Using the SML. Asset W has an expected return of...Ch. 11 - Reward-to-Risk Ratios. Stock Y has a beta of 1.20...Ch. 11 - Prob. 20QPCh. 11 - Prob. 21QPCh. 11 - Prob. 22QPCh. 11 - Prob. 23QPCh. 11 - Calculating Portfolio Weights and Expected Return....Ch. 11 - Portfolio Returns and Deviations. Consider the...Ch. 11 - Prob. 26QPCh. 11 - Analyzing a Portfolio. You want to create a...Ch. 11 - Prob. 28QPCh. 11 - SML. Suppose you observe the following situation:...Ch. 11 - Systematic versus Unsystematic Risk. Consider the...Ch. 11 - Beta is often estimated by linear regression. A...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.16 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? Answer to two decimals.arrow_forwardYou own a portfolio equally invested in a risk-free asset and two stocks. One of has risky as has a beta of 1.6, and the total portfolios is equally as risky as the market. What's the beta of the second stock?arrow_forwardYou own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.20 and the beta of the portfolio is 1.80, what is the beta of the other?arrow_forward
- You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.34 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) What is the portfolio beta?arrow_forwardYou have a portfolio that is equally invested in Stock F with a beta of 1.17, Stock G with a beta of 1.54, and the risk-free asset. What is the beta of your portfolio? Multiple Choice O O O 1.24 90 104 1.37 97arrow_forwardYou have a portfolio that is equally invested in Stock F with a beta of 1.09, Stock G with a beta of 1.46, and the market. What is the beta of your portfolio?arrow_forward
- Assume that you have a portfolio of two stocks, X and Y. If the risk of stock X is 1.2 and the risk of stock Y is 4 then the return on stock Y should be? If the portfolio is well diversified and stocks are strongly negatively related, then the risk for the portfolio will be?arrow_forwardWhat is a stock's alpha? Group of answer choices The amount you expect to earn on a security relative to some appropriate "benchmark" that appropriately reflects the risk of that investment In a CAPM world, if a stock is on the security market line, it's alpha is zero If you earn a return on security greater than the market overall, then you generated positive alpha In a CAPM world, you invest in a stock that has a Beta of 1. If you earn a return greater than the market, then you generated positive alpha In a CAPM world, you invest in a stock that has a Beta of 2. If you earn a return greater than the market, then you generated positive alphaarrow_forwardYou own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.16 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Betaarrow_forward
- You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.25 and an expected return of 15%. The other stock has an expected return of 21%. The total portfolio is equally as risky as the market (i.e.Bp=1). What is the beta for the other stock in your portfolio? What is the expected return of the risk-free asset? What is the expected return of the market? What is the expected return of your portfolio?arrow_forwardYou own a portfolio equally invested in a risk-free asset and two stocks. One of the stocks has a beta of 1.16 and the total portfolio is equally as risky as the market. What must the beta be for the other stock in your portfolio? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Betaarrow_forwardYou own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.26 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock betaarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Portfolio Management; Author: DevTechFinance;https://www.youtube.com/watch?v=Qmw15cG2Mv4;License: Standard YouTube License, CC-BY