Your retirement fund consists of a $5,000 investment in each of 15 different common stocks. The portfolio’s beta is 1.20. Suppose you sell one of thestocks with a beta of 0.8 for $5,000 and use the proceeds to buy anotherstock whose beta is 1.6. Calculate your portfolio’s new beta.

Your retirement fund consists of a $5,000 investment in each of 15 different common stocks. The portfolio’s beta is 1.20. Suppose you sell one of thestocks with a beta of 0.8 for $5,000 and use the proceeds to buy anotherstock whose beta is 1.6. Calculate your portfolio’s new beta.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 9P

See similar textbooks

Related questions

Q: An investor has $75,000 to invest in a CD and a mutual fund. The CD yields 7% and the mutual fund…

A: Amount to be invested =$ 75,000 Let x be the amount to be invested in CD , then amount to be…

Q: You are considering how to invest part of your retirement savings. You have decided to put $100,000…

A: Investment : 100,000 Investment in Goldfinger = 100,000*50% = 50,000 Investment in Moosehead =…

Q: You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of…

A: Expected Return of Equity = E(Ri) = Rf + ß * (Rm – Rf)

Q: A portfolio consists of assets with the following expected returns: Technology Stocks 20%…

A: 1] Stock expected return below: Technology Stocks 20% Pharmaceutical Stocks 15% Utility Stocks 10%…

Q: a mutual fund manager expects her portfolio to earn a rate of return of 11 percent this year. The…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: Suppose you are the money manager of a $5.04 million investment fund. The fund consists of four…

A: First we need to find beta of the portfolio Then expected return is equal to risk free rate plus…

Q: Consider the following information and then calculate the required rate of return for the Global…

A: Portfolio beta: Therefore, the portfolio beta is 1.14228. Formulas:

Q: Suppose money invested in a hedge fund earns 1% per trading day. There are 250 trading days per…

A: Given data; Return on investment = 1% Number of trading days = 250 investment amount = $100

Q: Your retirement portfolio comprises 100 shares of the Standard & Poor's 500 fund (SPY) and 100…

A: The below table shows the calculation of expected return on portfolio:

Q: You are managing a fund with an expected rate of return of 15% and a standard deviation of 27%. The…

A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.

Q: To create a delta-neutral portfolio, the SIT fund has sold 10,000 put options on Epsilon stock with…

A: Black Scholes Model is one of the model which is based on mathematical derivation so that prices of…

Q: You manage an equity fund with an expected risk premium of 8% and an expected standard deviation of…

A: Expected return:- The expected return is considered as the profit or loss that is anticipated by an…

Q: Reconsider the Fingroup Fund in the previous problem. If during the year the portfolio manager sells…

A: Answer - Portfolio Turnover Rate - Value of Assets Sold/ Replaced / Total Assets Value

Q: You are an analyst for a large public pension fund and you have been assigned the task of evaluating…

A: Financial statements are statements which states the business activities performed by the company .…

Q: Jason currently has all of his wealth in Treasury bills. He is considering investing 70% of his…

A: Beta is a measure of systematic risk of a particular stock as compared to the market. The expected…

Q: You are going to invest in a stock mutual fund with a front-end load of 4.5 percent and an expense…

A: Calculation of annual returns:Answer:The annual returns at 2 year and at 8th year is 6.08% and…

Q: Suppose you are the money manager of a $4.72 million investment fund. The fund consists of four…

A: Portfolio Fund refers to basket of stocks of different class and risk out together to maximize…

Q: An investor purchases a mutual fund for $60. The fund pays dividends of $1.20, distributes a capital…

A: A mutual fund is a company that pools money from many investors and invests the money in securities.

Q: Suppose you are the money manager of a $4.07 million investment fund. The fund consists of four…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Suppose you are the money manager of a $4.4 million investment fund. The fund consists of four…

A: A portfolio is a group of different securities held together with the objective of maximizing higher…

Q: The Closed Fund is a closed-end investment company with a portfolio currently worth $200 million. It…

A: Part (a): Answer: Net asset value is $39.4

Q: You manage a risky portfolio with an expected rate of return of 19% and a standard deviation of 33%.…

A: The investment proportions of the individual assets are given above on the basis of 80% of…

Q: You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of…

A: Expected Risk Premium is 10% Expected Standard Deviation is 14% Rate on Treasury bills is 6%…

Q: What follows is a numeric fill in the blank question with 5 blanks. You manage an equity fund with…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: You are considering how to invest part of your retirement savings. You have decided to put $600,000…

A: Amount invested in Goldfinger = 61% of $600000 = $366000 Amount invested in Moosehead = 12% of…

Q: If an investor buys shares in a no-load mutual fund for $33 and after eight years the shares…

A: Mutual funds refer to one type of financial vehicle that pools money from many investors and invests…

Q: Consider the following information and then calculate the required rate of return for the Global…

A: Risk free rate is the return which is minimum rate of return on investment. Beta signifies the…

Q: your retirement portfolio comprises 200 shares of the s&p 500 fund (SPY) and 100 shares of…

A: The question is based on the concept of calculation of rate of return on investment. The return can…

Q: Ff you invest 30% of your funds in AT&T stock with an expected rate of return of 10% and the…

Q: You are considering investing in a mutual fund. The fund is expected to earn a return of 19.0…

A: Given, Expected return= 19% Standard deviation = 10.3%

Q: Suppose you are the money manager of a $3.84 million investment fund. The fund consists of four…

A: Here, Total investment fund = $3.84 million Market's required rate of return = 9% Risk-free rate =…

Q: Suppose you are the money manager of an Rs.8 million investment fund. The fund consists of 4 stocks…

A: Stock Portfolio Beta- = XaBa+ XbBb+ XcBc+ XdBd = (800,000/ 8,000,000)(1.2)+ (1200,000/…

Q: The P10.00 million mutual fund Pingu manages has a beta of 1.05 and a 9.50% required return. The…

A: The portfolio is the combination of various financial assets in which an investor (or individual)…

Q: Curious George, a mutual fund manager, has a P40 million portfoilio with a beta of 1.00. The…

A: Beta is a financial metric which is used to measure the volatility of a stock. Beta measures the…

Q: Suppose you are the money manager of the following portfolio. The fund consists of four stocks with…

A: Calculation of portfolio Beta Coefficient Stock Investment Portfolio ratio Beta Portfolio beta…

Q: Suppose you are the money manager of a $4.94 million investment fund. The fund consists of four…

A: The capital asset pricing model (CAPM) refers to the model which tells us how the financial markets…

Q: Suppose you are the money manager of a $5.26 million investment fund. The fund consists of four…

A: According to CAPM model rate of return = Rf+beta×Rm-Rf GIVEN, Rf=5% Rm=9% therefore we can find…

Q: The portfolio manager of the TTY Fund, a $5 million hedge fund that contains the following stocks.…

A: The first step is to calculate the weight of each stock in the portfolio

Q: Suppose you are the money manager of a $4.38 million investment fund.

A: Portfolio beta is referred to the systematic risk associated with all the stocks in the portfolio.…

Q: You are considering how to invest part of your retirement savings.You have decided to put$100,000…

A: Given: Particulars Amount Actual price Price change Investment $100,000 Gold finger 55%…

Q: Suppose you invest $5,000 into a mutual fund that is expected to earn a rate of return of 7%. The…

A: Mutual Fund is an investment option where large number of investors put their investment amount…

Q: The Closed Fund is a closed-end investment company with a portfolio currently worth $170 million. It…

A: Net asset value = (Current value - Liabilities) / Shares outstanding Net asset value =($170 - $6) /…

Q: NAV

A: Formula to calculate premium or discount as a % of NAV is: Premium = (Price - NAV)/NAV To calculate…

Q: Suppose you are the money manager of a $4 million investment fund. The fund consists of four stocks…

A: Value of investment fund = $4,000,000 Stock Investment Beta Weighted beta A B C=B*(A/4,000,000)…

Q: Twelve months ago, you purchased the shares of a no-load mutual fund for $22.35 per share. The fund…

A: Given in the question, The purchase price of the share = $22.35 per share Cash dividends = $0.70…

Question

Your retirement fund consists of a $5,000 investment in each of 15 different common stocks. The portfolio’s beta is 1.20. Suppose you sell one of the
stocks with a beta of 0.8 for $5,000 and use the proceeds to buy another
stock whose beta is 1.6. Calculate your portfolio’s new beta.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

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

Your retirement fund consists of a $5,000 investment in each of 15 different common stocks. The portfolio's beta is 1.20. Suppose you sell one of the stocks with a beta of 0.7 for $5,000 and use the proceeds to buy another stock whose beta is 1.8. Calculate your portfolio's new beta. Do not round intermediate calculations. Round your answer to two decimal places.
Suppose you hold a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. Now, suppose you have decide to sell one of the stocks in your portfolio with a beta equal to 1.0 for 7,500 and to use these proceeds to buy another stocks for your portfolio. Assume the new stocks beta to 1.75. Calculate your portfolios new beta.
You are going to invest $50,000 in a portfolio consisting of assets X, Y, and Z, as follows; What is the expected return of this portfolio? Calculate the beta coefficient of the portfolio
Suppose you hold a portfolio consisting of a $10,000 investment in each of 8 different common stocks. The portfolio's beta is 1.25. Now suppose you decided to sell one of your stocks that has a beta of 1.00 and to use the proceeds to buy a replacement stock with a beta of 1.55. What would the portfolio's new beta be? Do not round your intermediate calculations.
An investor has $1000 initial wealth for investment and he borrows another $500 at the risk free rate. He then invest the entire total amount of $1500 in the market portfolio. What is his portfolio beta?
You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 13 percent. If Stock X has an expected return of 31 perCent and a beta of 1.80, and Stock Y has an expected return of 20 percent and a beta of 1.3 .how much money will you invest in Stocky? How do you interpret your answer? What is the beta of your portfolio?
Suppose you hold a portfolio consisting of a $10,000 investment in each of 8 different common stocks. The portfolio's beta is 1.30. Now suppose you decided to sell one of your stocks that has a beta of 0.80 and to use the proceeds to buy a replacement stock with a beta of 1.60. What would the portfolio's new beta be? Do not round your intermediate calculations. Round your final answer to 2 decimal places. a. 1.70 b. 1.34 c. 2.10 d. 1.60
You have a $2 million portfolio consisting of a $100,000 investment in each of 20 different stocks. The portfolio has a beta of 1.5. You are considering selling $100,000 worth of one stock with a beta of 0.9 and using the proceeds to purchase another stock with a beta of 2.2. What will the portfolio's new beta be after these transactions? Do not round intermediate calculations. Round your answer to two decimal places.
Suppose you hold a diversified portfolio consisting of a $4,000 investment in each of 14 different common stocks. The portfolio beta is 1.30. You decide to sell one of the stocks in your portfolio with a beta equal to 0.8 for $3,500 and use these proceed to buy another stock for your portfolio. Assume the new stock’s beta is equal to 1.75. Calculate your portfolio’s beta.
Your client decides to invest $1.4 million in Blandystock and $0.6 million in Gourmange stock. Whatare the weights for this portfolio? What is theportfolio’s beta? What is the required return forthis portfolio?
You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 24% .Suppose Stock X has an expected return of 18% and beta of 1.4, and Stock Y has an expected return of 12% and beta of 0.8 %. 1. How much money will you invest in Stock Y? 2. What is the beta of your portfolio?
You have a portfolio with a beta of 1.29. What will be the new portfolio beta if you keep 94 percent of your money in the old portfolio and 6 percent in a stock with a beta of 0.32? (Round your answer to 2 decimal places.) New portfolio beta %