# Question

Your father just learned from his financial advisor that his retirement portfolio has a beta of 1.80. He has turned to you to explain to him what this means. Specifically, describe what you would expect to happen to the value of his retirement fund if the following were to occur:

a. The value of the market portfolio rises by 7 percent.

b. The value of the market portfolio drops by 7 percent.

c. Is your father’s retirement portfolio more or less risky than the market portfolio?

Explain.

a. The value of the market portfolio rises by 7 percent.

b. The value of the market portfolio drops by 7 percent.

c. Is your father’s retirement portfolio more or less risky than the market portfolio?

Explain.

## Answer to relevant Questions

You are considering the construction of a portfolio comprised of equal investments in each of four different stocks. The betas for each stock on next page: Security BetaA ......... 2.5B ......... 1.0C ...Grace Corporation is considering the following investments. The current rate on Treasury bills is 2.5 percent and the expected return for the market is 9 percent. Stock BetaK .......... 1.12G .......... 1.3B ...The market price is $900 for a 10-year bond ($1,000 par value) that pays 8 percent annual interest, but makes interest payments on a semiannual basis (4 percent semiannually). What is the bond’s yield to maturity?The seven-year $1,000 par bonds of Vail Inc. pay 9 percent interest. The market’s required yield to maturity on a comparable-risk bond is 7 percent. The current market price for the bond is $1,100.a. Determine the yield to ...Assume the expected inflation rate is 3.8 percent. If the current real rate of interest is 6.4 percent, what should the nominal rate of interest be?Post your question

0