Your investment club has only two stocks in its portfolio. $10,000 is invested in a stock...

Your investment club has only two stocks in its portfolio. $10,000 is invested in a stock with a beta of 0.5, and $75,000 is invested in a stock with a beta of 1.5. What is the portfolio's beta? Round your answer to two decimal places.

Required Rate of Return

AA Corporation’s stock has a beta of 1.1. The risk-free rate is 2.5% and the expected return on the market is 11%. What is the required rate of return on AA's stock? Round your answer to two decimal places.

Required Rate of Return

Suppose r_RF = 5%, r_M = 12%, and r_A = 14%.

Calculate Stock A's beta. Round your answer to two decimal places.
If Stock A's beta were 1.5, then what would be A's new required rate of return? Round your answer to two decimal places.

Solutions

Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

Hope this will help, please do comment if you need any further explanation. Your feedback would be appreciated.

jeff jeffy answered 1 week ago

Next > < Previous

Related Solutions

Your investment club has only two stocks in its portfolio. $30,000 is invested in a stock...

Your investment club has only two stocks in its portfolio. $30,000 is invested in a stock with a beta of 0.4, and $60,000 is invested in a stock with a beta of 2.2. What is the portfolio's beta? Round your answer to two decimal places. AA Corporation’s stock has a beta of 1.3. The risk-free rate is 7% and the expected return on the market is 11%. What is the required rate of return on AA's stock? Round your answer...

The total value of your portfolio is $10,000: $3,000 of it is invested in Stock A...

The total value of your portfolio is $10,000: $3,000 of it is invested in Stock A and the remainder invested in Stock B. Stock A has a beta of 0.8; Stock B has a beta of 1.2. The risk premium on the market portfolio is 8%; the risk-free rate is 2%. Additional information on Stocks A and B is provided below. Return in Each State State Probability of State Stock A Stock B Excellent 15% 15% 5% Normal 50% 9%...

Q1：Assume that your portfolio has three stocks. You have $300,000 invested in stock A that is...

Q1：Assume that your portfolio has three stocks. You have $300,000 invested in stock A that is returning 17%, $300, 000 invested in stock B that is returning 16%, and $400,000 invested in stock C that is returning 18%. What is the expected return of your portfolio? Q2: A beta coefficient for a stock of 0.8 implies A. the stock is more risky than the market because an 1% decrease in the stock return will cause the market return to decrease...

Your investment portfolio consists of $18,000 invested in only one stock—Microsoft. Suppose the riskfree rate is...

Your investment portfolio consists of $18,000 invested in only one stock—Microsoft. Suppose the riskfree rate is 6%, Microsoft stock has an expected return of 13% and a volatility of 44%, and the market portfolio has an expected return of 12% and a volatility of 19%. Under the CAPM assumptions, a. What alternative investment has the lowest possible volatility while having the same expected return as Microsoft? What is the volatility of this investment? b. What investment has the highest possible...

Cheyenne holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as...

Cheyenne holds a $10,000 portfolio that consists of four stocks. Her investment in each stock, as well as each stock’s beta, is listed in the following table: Stock Investment Beta Standard Deviation Omni Consumer Products Co. (OCP) $3,500 0.80 15.00% Kulatsu Motors Co. (KMC) $2,000 1.90 11.00% Western Gas & Electric Co. (WGC) $1,500 1.10 16.00% Mainway Toys Co. (MTC) $3,000 0.50 28.50% Suppose all stocks in Cheyenne’s portfolio were equally weighted. Which of these stocks would contribute the least...

Your client has $100,000 invested in stock A. She would like to build a two-stock portfolio...

Your client has $100,000 invested in stock A. She would like to build a two-stock portfolio by investing another $100,000 in either stock B or C. She wants a portfolio with an expected return of at least 13.5% and a low a risk as possible, the standard deviation must be no more than 30%. What do you advise her to do (Rationalize your answer), and what will be the expected return and deviation of the recommended portfolio? (Please Show Calculations)....

Your client has $96,000 invested in stock A. She would like to build a two-stock portfolio...

Your client has $96,000 invested in stock A. She would like to build a two-stock portfolio by investing another $96,000 in either stock B or C. She wants a portfolio with an expected return of at least 14.5% and as low a risk as possible, but the standard deviation must be no more than 40%. What do you advise her to do, and what will be the portfolio expected return and standard deviation? Expected Return Standard Deviation Correlation with A...

Your investment club has the choice of investing in the following companies and have £10,000 to...

Your investment club has the choice of investing in the following companies and have £10,000 to invest. Alpha plc – a biotech company that is researching into the ageing process. Its main line of research is into the naturally occurring, but elusive and unstable chemical alphaomega. The company works out of leased laboratories and employs 20 eminent scientists and associated back up staff. After 8 years the company has yet to bring a product to the market. If alphaomega, now...

Your investment club is currently revising its investment portfolio, and one company that you have recommended...

Your investment club is currently revising its investment portfolio, and one company that you have recommended for possible inclusion in the club’s portfolio is Select Harvests Limited (ASX Code: SHV). Select Harvests Limited operates in the food products industry and is involved in the processing, packaging, marketing and distribution of edible nuts (particularly almonds), dried fruits, seeds and a range of natural health foods. A key indicator that your investment club uses for screening purposes is firm risk, and you...

A portfolio has $200,000 invested in bonds and $300,000 invested in stocks. The bonds have an...

A portfolio has $200,000 invested in bonds and $300,000 invested in stocks. The bonds have an expected return of 8% a with a standard deviation of 12%. The stocks have an expected return of 12% with a standard deviation of 20%. The correlation between the stocks and bonds is 0.40. 1. What is the portfolio weight for the bonds? 2. What is the portfolio weight for the stocks? 3. What is the expected return for the portfolio? (Treat the expected...

Subjects