Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Question
Chapter 12, Problem 7QAP
a
Summary Introduction
Adequate information:
Beta of factor 1
Beta of factor 2
Expected return of the stocks
To compute: Return on portfolio
Introduction: Return on portfolio refers to the sum total of returns earned on individual securities such as stocks, bonds, etc.
b
Summary Introduction
Adequate information:
Beta of factor 1
Beta of factor 2
Expected return of the stocks
To compute: Return on portfolio
Introduction: Return on portfolio refers to the sum total of returns earned on individual securities such as stocks, bonds, etc.
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Consider a portfolio consisting of the following three stocks:
an expected return of 8%. The risk-free rate is 3%.
a. Compute the beta and expected return of each stock.
▪
The volatility of the market portfolio is 10% and it has
b. Using your answer from part a, calculate the expected return of the portfolio.
c. What is the beta of the portfolio?
d. Using your answer from part c, calculate the expected return of the portfolio and verify that it matches your answer to
part b.
Consider a portfolio consisting of the following three stocks: E The volatility of the market portfolio is 10% and it has an expected return of 8%. The risk-free rate is 3%.
a. Compute the beta and expected return of each stock.
b. Using your answer from part (a), calculate the expected return of the portfolio.
c. What is the beta of the portfolio?
d. Using your answer from part (c), calculate the expected return of the portfolio and verify that it matches your answer to part (b).
a. Compute the beta and expected return of each stock. (Round to two decimal places.)
TITLT
Data table
Portfolio Weight
(A)
Volatility
(B)
Correlation
(C)
Expected Return
(E)
%
Beta
(D)
НЕС Согр
0.28
13%
0.33
Green Widget
(Click on the following icon a in order to copy its contents into a spreadsheet.)
0.39
27%
0.61
%
Portfolio Weight
Alive And Well
0.33
14%
0.43
Volatility
13%
Correlation with the Market Portfolio
НЕС Согр
Green Widget
0.28
0.33
b. Using your answer from part (a), calculate the expected…
Consider a portfolio consisting of the following three stocks:
LOADING...
.
The volatility of the market portfolio is
10%
and it has an expected return of
8%.
The risk-free rate is
3%.
a. Compute the beta and expected return of each stock.
b. Using your answer from part
a,
calculate the expected return of the portfolio.
c. What is the beta of the portfolio?
d. Using your answer from part
c,
calculate the expected return of the portfolio and verify that it matches your answer to part
b.
Question content area bottom
Part 1
a. Compute the beta and expected return of each stock. (Round to two decimal places.)
Portfolio Weight
(A)
Volatility
(B)
Correlation
(C)
Beta
(D)
Expected Return
(E)
HEC Corp
0.27
11%
0.33
enter your response here
enter your response here%
Green Widget
0.33
29%
0.71
enter your response here
enter your response here%
Alive And Well
0.40
11%
0.53
enter your response here
enter…
Chapter 12 Solutions
Corporate Finance
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