Question

In: Finance

Consider the following information: Portfolio Expected Return Beta Risk free. 12% 0 Market 12.6% 1 A...

Consider the following information:

Portfolio Expected Return Beta

Risk free. 12% 0

Market 12.6% 1

A 10.6% 0.7

a) calculate the expected return of Portfolio A with a beta of 0.7

b) what is the alpha of portfolio A?

Solutions

Expert Solution

a) Expected return = risk free rate + (market return - risk free rate) *beta

= 12% + ( 12.6% - 12%) * .7 = 12.42%

b) Alpha = Portfolio return - expected return = 10.6% - 12.42% = -2.42%

jeff jeffy answered 3 years ago
Next > < Previous

Related Solutions

Consider the following information: Portfolio Expected Return Beta Risk-free 8 % 0 Market 10.2 1.0 A...
Consider the following information: Portfolio Expected Return Beta Risk-free 8 % 0 Market 10.2 1.0 A 8.2 0.7 a. Calculate the expected return of portfolio A with a beta of 0.7. (Round your answer to 2 decimal places.) Expected return % b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Alpha % c. If the simple CAPM is valid, is the above situation possible? Yes...
Consider the following information: Portfolio Expected Return Beta Risk-free 7 % 0 Market 10.4 1.0 A...
Consider the following information: Portfolio Expected Return Beta Risk-free 7 % 0 Market 10.4 1.0 A 9.0 1.5 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.5. (Round your answer to 2 decimal places.) Return??? b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Beta??? c.  If the simple CAPM is valid, is the situation above possible? Yes or No???
The market portfolio has expected return of 12% and risk of 19%, and the risk free...
The market portfolio has expected return of 12% and risk of 19%, and the risk free rate is 5%. According to the capital market line (the line that connects the risk free rate to efficient frontier), what is the portfolio weight for the risky market portfolio if an investor wants to achieve 8.5% return? What about 16.2%? And 19% return?
A portfolio that combines the risk-free asset and the market portfolio has an expected return of...
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6 percent and a standard deviation of 9 percent. The risk-free rate is 3 percent, and the expected return on the market portfolio is 11 percent. Assume the capital asset pricing model holds.    What expected rate of return would a security earn if it had a .35 correlation with the market portfolio and a standard deviation of 54 percent?
A portfolio that combines the risk-free asset and the market portfolio has an expected return of...
A portfolio that combines the risk-free asset and the market portfolio has an expected return of 6.7 percent and a standard deviation of 9.7 percent. The risk-free rate is 3.7 percent, and the expected return on the market portfolio is 11.7 percent. Assume the capital asset pricing model holds. What expected rate of return would a security earn if it had a .42 correlation with the market portfolio and a standard deviation of 54.7 percent? (Do not round intermediate calculations....
According to the CAPM, a stock is twice as risky as the market portfolio The expected return of the market portfolio is 12 and the risk free rate is 6
Accordingto the CAPM, a stock is twice as risky as the market portfolio Theexpected return of the market portfolio is 12 and the risk free rate is 6 Thestock’s price is currently 10 An analyst predicts that the price will be 11 in oneyear According to the analyst, where does this stock plot relative to the SML? Ifthe analyst’s forecast is correct, then by what percentage would the stock’s pricehave to change today in order for it to plot on...
The risk-free rate of return is 6%, the expected rate of return on the market portfolio...
The risk-free rate of return is 6%, the expected rate of return on the market portfolio is 15%, and the stock of Xyrong Corporation has a beta coefficient of 2.3. Xyrong pays out 45% of its earnings in dividends, and the latest earnings announced were $9.00 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18% per year on all reinvested earnings forever. a. What is the...
The risk-free rate of return is 10.0%, the expected rate of return on the market portfolio...
The risk-free rate of return is 10.0%, the expected rate of return on the market portfolio is 17%, and the stock of Xyrong Corporation has a beta coefficient of 1.6. Xyrong pays out 30% of its earnings in dividends, and the latest earnings announced were $15 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 20% per year on all reinvested earnings forever. a. What is the...
The risk-free rate of return is 6%, the expected rate of return on the market portfolio...
The risk-free rate of return is 6%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 1.3. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $8.00 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 15% per year on all reinvested earnings forever. a. What is the...
The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio...
The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio is 14%, and the stock of Xyrong Corporation has a beta coefficient of 2.0. Xyrong pays out 50% of its earnings in dividends, and the latest earnings announced were $20 per share. Dividends were just paid and are expected to be paid annually. You expect that Xyrong will earn an ROE of 18% per year on all reinvested earnings forever. a. What is the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT