Lucas builds a portfolio by investing in two stocks only: Microsoft (MSFT) and Motorola (MSI). According to the CAPM, the expected risk premium (i.e., the expected return minus the risk-free rate) of MSFT is 14.4% and the expected risk premium of MSI is 5.15%. The beta of MSFT is equal to 1.1. If Lucas puts 63% of his money in MSFT stock and 37% in MSI stock, what is the approximate beta of his portfolio?  


2.Anakin forms an aggressive growth portfolio by investing 22% of his savings in GM stock, 23% in Toyota stock, 24% in Kia stock, 11% in an index fund, and the last 20% is allocated on a bond fund. Assume for simplicity that the index fund is a good proxy to the market portfolio and has a beta equal to 1, whereas the bond fund is a good proxy to the riskless asset. The beta of GM stock is 1.12, the beta of Toyota is 1.38, and the beta of Kia is 1.83. If the expected return of the market index is 14% and the risk-free asset yields 6%, what are the beta and the expected return of Anakin's portfolio? Give your answer rounded to two decimal places.

 

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The CFO of MediSearch plc believes that investing into a project which will develop a new drug for fighting the I virus, promises a long-term annual return of 11%. The expected return of the market index is RM = 12.3%, the volatility of the market index is M = 10.5%, and the risk-free asset earns Rf = 2.9%. The CFO has studied similar projects of other companies and believes that the covariance between the returns of this project and the returns of the market is op,M = 0.0103 (in decimal form). What is the beta of the project? Enter your answer rounded to two decimal places. The CFO of MediSearch plc believes that investing into a project which will develop a new drug for fighting the I virus, promises a long-term annual return of 11%. The expected return of the market index is RM = 12.3%, the volatility of the market index is M = 10.5%, and the risk-free asset earns Rf = 2.9%. The CFO has studied similar projects of other companies and believes that the covariance between the returns of this project and the returns of the market is op,M = 0.0103 (in decimal form). What is the beta of the project? Enter your answer rounded to two decimal places.

Answer rating: 100% (QA)

1 To calculate the beta of Lucass portfolio we use the formula Beta portfolio Weight of MSFT Beta of ... View the full answer