How to find portfolio weight with beta and expected return

Asked by admin @ 29/10/2021 in Business viewed by 301 People

A stock has a beta of 1.75 and an expected return of 12 percent. A risk-free asset currently earns 3.0 percent.a. What is the expected return on a portfolio that is equally invested in the two assets? (Round your answer to 2 decimal places. (e.g., 32.16)) Expected return %b. If a portfolio of the two assets has a beta of 0.98, what are the portfolio weights? (Round your answer to 4 decimal places. (e.g., 32.1616))Weight of stock Risk-free weight c. If a portfolio of the two assets has an expected return of 9 percent, what is its beta? (Do not round intermediate calculations and round your answer to 3 decimal places. (e.g., 32.161)) Beta d. If a portfolio of the two assets has a beta of 3.50, what are the portfolio weights? (Negative amount should be indicated by a minus sign.)Weight of stock Risk-free weight

Answered by admin @ 29/10/2021

Answer:

a) Expected return of portfolio = (12*.5 ) +(3*.5) = 6 + 1.5 = 7.5%

b)Beta of risk free asset = 0 (as there is no risk involved)

Let weight of stock = X

Weight of risk free asset = 1-X

Portfolio beta = (Beta of stock *Ws) +(Beta of risk free asset *Wd)

0.98 = (1.75 *X)+(0 *[1-X)]

0.98 = 1.75x + 0

X = 0.98 /1.75

X = 0.56

Weight of stock = 0.56 or 56%

Weight of risk free asset = 1 - 0 .56 = 0.44 or 44%

c) Expected rate = Rf+Beta *(Market rate - Rf)

12% = 3% + 1.75*(Market rate - RF)

(Market rate - Rf) = 9%/1.75

(Market rate - Rf) = 5.1429%

Now expected rate is given as 9%

Expected rate = Rf + Beta*(Market rate - Rf)

9% = 3% + Beta*(Market rate - Rf)

Beta = 6%/5.1429%

Beta = 1.1667

d) 3.50 = [1.75*X ] + [0*(1-X)]

3.5 = 1.75X + 0

X = 3.5/1.75

X = 2

Weight of stock = 2 or 200%

Weight of risk free asset = 1 - 2 = -1 or -100%

Earth has a mass of 5.97 x 1024 kg and a radius of 6.38 x 106 m, while saturn has a mass of 5.68 x 1026 kg and a radius of 6.03 x 107 m. find the weight of a 65.0 kg person at the following locations? a) on the surface of the earth. b) 1000 km above the surface of earth. c) on the surface of saturn. d) 1000 km above the surface of saturn.

Asked by maham237 @ 13/01/2021 in Physics viewed by 576 persons

Take any three non-collinear points a b c and draw triangle a,b,c. through each vertex of the triangle draw a line parallel to the opposite side using ruler and compass

Asked by wiki @ 15/11/2022 in Mathematics viewed by 1532 persons

What is the topic of the info grapher

Asked by jesus643 @ 04/11/2022 in History viewed by 1526 persons

Foolproof module 9 test answers

Asked by maham237 @ 31/12/2020 in Business viewed by 3329 persons

Able, baker, and charles are engaged in the marketing to and enrollment of beneficiaries into medicare health plans. mr. able is an independent agent paid directly by a health plan. ms. baker is an independent agent paid through a field marketing organization (fmo). mr. charles is an independent agent paid for his work by a third-party marketing organization (tmo). how do the cms compensation rules apply to these three agents?

Asked by maham237 @ 13/01/2021 in Business viewed by 2750 persons

How to find portfolio weight with beta and expected return

Similar Questions

Where would you expect to find lava solidifying into basalt

Where would you expect to find tight junctions

What did john white find when he returned to roanoke

Find the weight of a 60 kg astronaut on earth

Consider a portfolio that offers an expected rate

Experiment 1 find the best mouse diet for weight gain

How to find weighted average number of common shares outstanding

Overcoming fixed mindset: a step-by-step guide to cultivating a growth mindset

Which of the following would best complete this list?

What had the king decided to do before he saw the spider

Describe the karez in your own words

What is 8 + (x + 5)?

Take any three non-collinear points a b c and draw triangle a,b,c. through each vertex of the triangle draw a line parallel to the opposite side using ruler and compass

What is the topic of the info grapher

Most viewed questions in Business

Foolproof module 9 test answers

Interest rates are expressed as a percentage of

How to enhance knowledge regarding environmental factors through capsim?

Match the job titles with the career clusters.

A company that allows you to license software

Lupe is ready to open a checking account

Mays and mccovey are beer brewing companies

What must be marked on ready to eat bags phfs

Coq six sigma

Henry ford was the first entrepreneur to implement which strategy

Your company was recently served with a lawsuit

Case study starting a business project schedules and curves edgenuity

Which two of the four cs of credit have to do with earning potential and available cash?

The total annual expenditures on advertising in the united states