2. You have been asked to look at the following share portfolio: Share Value of holding...
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2. You have been asked to look at the following share portfolio: Share Value of holding Return last 12 months Standard deviation Beta A K14,000 13% 46% 1.1 B K16,000 15% 32% 1.3 с K19,000 8% 63% 0.9 Over the last 12 months, the return on the market was 10% and the risk-free rate was 6%. (a) Calculate the beta and return over the last 12 months of the portfolio. (b) Estimate the return you would have expected from the portfolio using the Capital Asset Pricing Model (CAPM). Explain why the expected return is different from the actual return. (c) Assuming that the returns on shares A and B have a correlation coefficient of 0.5%, calculate the return and risk of a portfolio consisting only of holdings in A and B. 2. You have been asked to look at the following share portfolio: Share Value of holding Return last 12 months Standard deviation Beta A K14,000 13% 46% 1.1 B K16,000 15% 32% 1.3 с K19,000 8% 63% 0.9 Over the last 12 months, the return on the market was 10% and the risk-free rate was 6%. (a) Calculate the beta and return over the last 12 months of the portfolio. (b) Estimate the return you would have expected from the portfolio using the Capital Asset Pricing Model (CAPM). Explain why the expected return is different from the actual return. (c) Assuming that the returns on shares A and B have a correlation coefficient of 0.5%, calculate the return and risk of a portfolio consisting only of holdings in A and B.
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a Beta To calculate the beta of the portfolio we need to calculate the weighted average of the betas ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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