There are 3 stocks in a portfolio: Stock A, Stock B, and Stock C. The portfolio has a return of 3.3%. You are given below the weight of each stock in the portfolio and rate of return. What is the return of Stock C?

Stock                     Weight          Rate of Return

A                             35%                 -4%

B                             60%                   7%

C                              5%                      ?



Problem Set 7: Beta

You are given the information for the following securities:

Security               Weight                   Beta

DCLK                      .133                     4.03

KO                          .2                         0.84

INTC                      .267                     1.05

KEI                          .4                         0.59

What is the portfolio beta?
Which security has the highest systematic risk?
Which security has the lowest systematic risk?  
Is the systematic risk of the portfolio more or less than the market?


Problem Set 8: CAPM

Assume Risk-free rate = 3%, Return on the market = 8%. Calculate the return on the stock if the beta is

0
0.5
1
2
Interpret your answers


Problem Set 9: Portfolio Beta

A $100,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 1.80 while the beta of stock B is 0.20. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.75?


Problem Set 10: Benefits of Diversification

Describe the benefits of diversification in your own words.
What is correlation and when does it help with diversification?


Problem Set 11: Portfolio Beta  (Also upload your excel files showing your work.)

You want to create a portfolio equally as risky as the market. Given this information, fill in the rest of the following table:

Asset      Investment        Beta

Stock A         20%             0.8

Stock B         25%             1.3

Stock C           ?                1.5

Risk-free Asset?                 ?



Problem Set 12: CAPM   (Also upload your excel files showing your work.)

The Treasury Bill rate is 4%, and the expected return on the market portfolio is 12%.

 What is the risk premium on the market?
What is the required return on an investment with beta of 1.5?
If the market expects a return of 11.2% from Stock X, what is its beta?


Problem Set 13

A stock has a beta of 1.2 and a return of 16%. A risk-free asset currently earns 5%.

What is the beta of the risk-free asset?
What is the return on the portfolio that is equally invested in the two assets (i.e. stock and risk-free asset)?
If a portfolio of the two assets has a beta of 0.75, what are the portfolio weights?
If a portfolio of the two assets has an return of 8%, what is its beta?

Answer rating: 100% (QA)

Problem Set 7 Beta To find the portfolio beta well use the formula Portfolio Beta Weight of Security DCLK Beta of Security DCLK Weight of Security KO Beta of Security KO Weight of Security INTC Beta o... View the full answer