You are putting together a portfolio made up of four different stocks. However, you are considering two
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Question:
You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings:
Portfolio Weightings | ||||
Asset | Beta | First Portfolio | Second Portfolio | |
---|---|---|---|---|
A | 2.00 | 15% | 35% | |
B | 1.10 | 15% | 35% | |
C | 0.55 | 35% | 15% | |
D | −1.60 | 35% | 15% |
.
a. What is the beta on each portfolio?
b. Which portfolio is riskier?
c. If the risk-free rate of interest were
4.5
percent and the market risk premium were
7
percent,
what rate of return would you expect to earn from each of the portfolios?
Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
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