A stock has a beta of 1.13 and an expected return of 12.1 percent. A risk-free asset
Question:
A stock has a beta of 1.13 and an expected return of 12.1 percent. A risk-free asset currently earns 5 percent.
a. What is the expected return on a portfolio that is equally invested in the two assets?
b. If a portfolio of the two assets has a beta of 0.50, what are the portfolio weights?
c. If a portfolio of the two assets has an expected return of 10 percent, what is its beta?
d. If a portfolio of the two assets has a beta of 2.26, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain.
Expected ReturnThe expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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a Again we have a special case where the portfolio is equally weighted so we can sum the returns of ...View the full answer
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Related Book For 
Corporate Finance
ISBN: 978-0071339575
7th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro
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