Question: Hi, I have a question about this exercice: This is a part of the solution but I dont get where the Beta of 1 for

Hi, I have a question about this exercice:

Hi, I have a question about this exercice: This is a part

This is a part of the solution but I dont get where the Beta of 1 for the Treasury bills comes from? (According to the internet Beta on treasury bills is always zero.)

of the solution but I dont get where the Beta of 1

Any help will be highly appreciated.

An investor currently has all of his wealth in Treasury bills. He is considering investing one-third of his funds in General Electric, whose beta is 1.30, with the remainder left in Treasury bills. The expected risk-free rate (Treasury bills) is 6 percent and the market risk premium is 8.8 percent. Determine the beta and the expected return on the proposed portfolio. Since the breakdown of the portfolio is 1/3rd company G and 2/3rds treasury bonds the expected beta of the portfolio can be calculated by multiplying the individual investment weight by the beta for each investment then summing the results. This is shown in the table below: % Investment Beta Expected weighted beta Company G 33.3% 1.30% 0.43% Treasury Bills 66.7% 1.00% 0.67% 1.10% The expected beta of the portfolio is 1.10

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

5. (20 points) Consider the following capital budgeting problem (also called Lorie-Savage problem as being introduced by these researchers in 1955), select the subset of projects that maximizes the...

ITEM #1 LEARNING FROM THE HEADLINES True to the Learning from the Headlines approach of this course, watch the Part Three Intro Video after you read the short article the video highlights. Notice...

I need your help with this: Can you please quote from the attached chapters / resource if possible? Corporations often use different costs of capital for different operating divisions. Using an...

One. Recall an experience at work or school (or in life generally) when your perceptions (or someone else's perceptions) were later found to be distorted. The following factors distort our...

Please provide excel spreadsheet detailing how you got to the multiple choice answer. I am trying to get ahead and understand each of the practiceproblems in prep for a exam so it would be very...

Questions were written in the word file named questions, and the question related powerpoint slides were named as slides. Thanks in advance. 1) The common stock of Marielle Machinery will generate...

look into the transcription of the videos that we coded for the Dominance project and identify if there are any errors (grammar and spelling and etc): 1673015005057.mp4 Baseline 181 Baseline181 Hi,...

Review the following articles and describe how they relate to Money or Central Banking. Coronavirus Freaked Markets, Not the Fed (Chapter 8) By Bill Dudley, February 25, 2020 The U.S. equity market...

What are emergent themes for the below comments. The best part is host did not interrupt him even once. great job. Ok, I've destroyed my phone, what's next? I don't know the interviewer, but he did a...

Need help with the attached questions from finance major Assignment 3 Questions 1. Anle Corporation has a current price of $27, is expected to pay a dividend of $2 in one year, and its expected price...

my question is why question 34's solution shows that a contract multiplier is $500? for questions 35 is why the change in yields is 0.01%. for question 36, how to get 82.8? why the change in yield is...

Use the information of the following primal problem (P) (and Complementary Slackness conditions) to solve the dual (D): Max 2x + 4x + 3x3 + x4 P: S.t 3x + x + x3 + 4x4 12 X - 3x2 + 2x3 + 3x4 7 2x +...

Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows: Total Sales $11,250,000 Total variable cost 7,312,500 Contribution margin $3,937,500...

An investment project has annual cash inflows of \ ( \ $ 2 , 6 0 0 , \ $ 3 , 8 0 0 , \ $ 5 , 3 0 0 \ ) , and \ ( \ $ 4 , 5 0 0 \ ) , for the next four years, respectively. The discount rate is 9...

A single circuit 3 phase transmission transposed line is composed of four ACSR 1,272,000 cmil conductor per phase with horizontal configuration as shown below. The bundle spacing is 45 cm. The...

Fault analysis: Consider the following five-bus power system (A-Y phase shifts are negligible. Prefault voltage is 1.08 per unit). Figure 2: A five-bus power system. Gener- ator G1: 100 MVA, 10 kV,...

the intensity of light from a lightbulb is 10 w/m^2 at a distance of 0.50 from the bulb. what is the intensity across the room at a distance of 3.5m?

The synchronous generator shown in the figure below is operated at its rated apparent power (100 MVA), 0.95 pf. lagging, and 5% above rated voltage. Determine the subtransient fault current if a...

a. A company has three (3) branches in Ghana Wa, Kumasi and Accra. The manager of the Kumasi branch has been found guilty of gross infractions in the business and has been forced to resign. During...

How often and under what circumstances do your customers go ballistic?

How can you give feedback to your colleagues in such a way that you maintain strong, effective working relationships?

Every time we get passed from one department to another without being helped and we dont speak up, we allow the company to not improve its internal communications.