Question

In: Finance

A stock has an expected return of 0.12, its beta is 0.94, and the risk-free rate...

A stock has an expected return of 0.12, its beta is 0.94, and the risk-free rate is 0.02. What must the expected return on the market be? Enter the answer with 4 decimals (e.g. 0.0567).

You own a stock portfolio invested 32 percent in Stock Q, 22 percent in Stock R, 19 percent in Stock S, and 27 percent in Stock T. The betas for these four stocks are 1.93, 1.64, 0.91, and 1.42, respectively. What is the portfolio beta? Enter the answer with 4 decimals (e.g. 1.1234)

A stock has a beta of 0.64, the expected return on the market is 0.11, and the risk-free rate is 0.05. What must the expected return on this stock be? Enter the answer with 4 decimals (e.g. 0.1234).

You own a portfolio that has $6600 invested in Stock A and $8700 invested in Stock B. If the expected returns on these stocks are 0.01 and 0.29, respectively, what is the expected return on the portfolio?

Enter the answer with 4 decimals (e.g. 0.1234).

Solutions

Expert Solution

  • A stock has an expected return of 0.12, its beta is 0.94, and the risk-free rate is 0.02. What must the expected return on the market be?

ra = 0.12, Beta=0.94, rf=0.02, expected return on market rm= ?

rm= (0.12-0.02)/0.94 + 0.02

rm= 0.1264

  • You own a stock portfolio invested 32 percent in Stock Q, 22 percent in Stock R, 19 percent in Stock S, and 27 percent in Stock T. The betas for these four stocks are 1.93, 1.64, 0.91, and 1.42, respectively. What is the portfolio beta?

WQ=32%, WR=22%, WS=19%, WT=27%

Q=1.93   R=1.64 S=0.91 T=1.42

Portfolio Beta P= WQ*Q+ WR?*R+WS?*S+WT?*T

Portfolio Beta P= (32%)(1.93) +(22%)(1.64) +(19%)(0.91) +(27%)(1.42)

Portfolio Beta P= 1.5347

  • A stock has a beta of 0.64, the expected return on the market is 0.11, and the risk-free rate is 0.05. What must the expected return on this stock be?

=0.64, rm= 0.11, rf =0.05

ra = rf + (rm - rf )

ra = 0.05 + 0.64(0.11-0.05)

ra = 0.05 + 0.0384

ra = 0.0884

  • You own a portfolio that has $6600 invested in Stock A and $8700 invested in Stock B. If the expected returns on these stocks are 0.01 and 0.29, respectively, what is the expected return on the portfolio?

Answer : 0.1692

Stock
Amount Invested
Weight(W)=amount in stock/ total amount
Expected Return ( r )
w * r
A
6600
6600/15300=
0.4313725

0.01

0.004314
B 8700 8700/15300=
0.5686275
0.29
0.164902
Total
15300
0.169216

Related Solutions

5) A stock has an expected return of 0.14, its beta is 0.94, and the expected...
5) A stock has an expected return of 0.14, its beta is 0.94, and the expected return on the market is 0.07. What must the risk-free rate be? (Hint: Use CAPM) Enter the answer in 4 decimals e.g. 0.0123. 6) You own a portfolio equally invested in a risk-free asset and two stocks (If one of the stocks has a beta of 1.77 and the total portfolio is equally as risky as the market, what must the beta be for...
A stock has an expected return of 0.07, its beta is 0.75, and the risk-free rate...
A stock has an expected return of 0.07, its beta is 0.75, and the risk-free rate is 0.03. What must the expected return on the market be? Enter the answer with 4 decimals (e.g. 0.0567).
A stock has an expected return of 0.06, its beta is 1.12, and the risk-free rate...
A stock has an expected return of 0.06, its beta is 1.12, and the risk-free rate is 0.03. What must the expected return on the market be? Enter the answer with 4 decimals (e.g. 0.0567). You own a stock portfolio invested 32 percent in Stock Q, 22 percent in Stock R, 19 percent in Stock S, and 27 percent in Stock T. The betas for these four stocks are 1.87, 1.81, 2.64, and 0.99, respectively. What is the portfolio beta?...
Stock A has a beta of 1.5, the risk-free rate is 4% and the return on...
Stock A has a beta of 1.5, the risk-free rate is 4% and the return on the market is 9%. If inflation changes by -2%, by how much will the required return on Stock A change?
Stock A has a beta of 0, the risk-free rate is 4% and the return on...
Stock A has a beta of 0, the risk-free rate is 4% and the return on the market is 9%. If the market risk premium changes by 8%, by how much will the required return on Stock A change?
A stock has a beta of 1.6 and an expected return of 14 percent. A risk-free...
A stock has a beta of 1.6 and an expected return of 14 percent. A risk-free asset currently earns 4 percent. a) What is the expected return on a portfolio that is equally invested in the two assets? b) If a portfolio of the two assets has a beta of 0.8, what are the portfolio weights? c) If a portfolio of the two assets has an expected return of 10 percent, what is its beta? d) If all assets in...
A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free...
A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? (Do not round intermediate calculations. Enter your answers...
A stock has a beta of 0.6 and an expected return of 10 percent. A risk-free...
A stock has a beta of 0.6 and an expected return of 10 percent. A risk-free asset currently earns 4.1 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. If a portfolio of the two assets has a beta of 0.57, what are the portfolio weights? (Do not round intermediate calculations. Enter your answers...
A stock has a beta of 1.38 and an expected return of 13.6 percent. A risk-free...
A stock has a beta of 1.38 and an expected return of 13.6 percent. A risk-free asset currently earns 4.7 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return % b. If a portfolio of the two assets has a beta of .98, what are the portfolio weights? (Do not...
A stock has a beta of 1.3 and an expected return of 12.8 percent. A risk-free...
A stock has a beta of 1.3 and an expected return of 12.8 percent. A risk-free asset currently earns 4.3 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return             % b. If a portfolio of the two assets has a beta of .90, what are the portfolio weights? (Do not...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT