You own a portfolio that has a total value of 118,000 dollars. The portfolio has 8,000...

You own a portfolio that has a total value of 118,000 dollars. The portfolio has 8,000 shares of stock A, which is priced at 9.3 dollars per share and has an expected return of 11.97 percent. The portfolio also has 10,000 shares of stock B, which has an expected return of 15.29 percent. The risk-free return is 4.22 percent and inflation is expected to be 1.98 percent. What is the risk premium for your portfolio? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Expert Solution

Total investment = $118,000

Investment in stock A = Number of shares * Price per share
Investment in stock A = 8,000 * $9.30
Investment in stock A = $74,400

Investment in stock B = Total investment - Investment in stock A
Investment in stock B = $118,000 - $74,400
Investment in stock B = $43,600

Weight of stock A = Investment in stock A / Total investment
Weight of stock A = $74,400 / $118,000
Weight of stock A = 0.63051

Weight of stock B = Investment in stock B / Total investment
Weight of stock B = $43,600 / $118,000
Weight of stock B = 0.36949

Portfolio expected return = Weight of stock A * Expected return of stock A + Weight of stock B * Expected return of stock B
Portfolio expected return = 0.63051 * 0.1197 + 0.36949 * 0.1529
Portfolio expected return = 0.1320

Portfolio risk premium = Portfolio expected return - Risk-free rate
Portfolio risk premium = 0.1320 - 0.0422
Portfolio risk premium = 0.0898

jeff jeffy answered 1 year ago

You own a portfolio that has a total value of 107,000 dollars. The portfolio has 5,000...

You own a portfolio that has a total value of 107,000 dollars. The portfolio has 5,000 shares of stock A, which is priced at 6.8 dollars per share and has an expected return of 10.98 percent. The portfolio also has 10,000 shares of stock B, which has an expected return of 17.83 percent. The risk-free return is 3.48 percent and inflation is expected to be 1.99 percent. What is the risk premium for your portfolio? Answer as a rate in...

You own a portfolio that has a total value of 129,000 dollars. The portfolio has 6,000...

You own a portfolio that has a total value of 129,000 dollars. The portfolio has 6,000 shares of stock A, which is priced at 7.6 dollars per share and has an expected return of 11.87 percent. The portfolio also has 10,000 shares of stock B, which has an expected return of 15.29 percent. The risk-free return is 4.09 percent and inflation is expected to be 1.53 percent. What is the risk premium for your portfolio? Answer as a rate in...

You own a portfolio that has a total value of 235000 and it is invested in...

You own a portfolio that has a total value of 235000 and it is invested in stock D with the Beta of .82 and stock E with a Beta of 1.43.the Beta of your portfolio equal to the market beta.what is the dollar amount of your investment in stock D

You own a portfolio that has a total value of $280,000 and it is invested in...

You own a portfolio that has a total value of $280,000 and it is invested in Stock D with a beta of .73 and Stock E with a beta of 1.52. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D?

You own a portfolio that has a total value of $245,000 and it is invested in...

You own a portfolio that has a total value of $245,000 and it is invested in Stock D with a beta of .80 and Stock E with a beta of 1.45. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D?

You own a portfolio that has a total value of $175,000 and it is invested in...

You own a portfolio that has a total value of $175,000 and it is invested in Stock D with a beta of .89 and Stock E with a beta of 1.31. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D? Choices: $40,104.17 $22,917.11 $34,375.22 $129,166.67 $45,833.33

You own a portfolio that has a total value of $150,000 and a beta of 1.32....

You own a portfolio that has a total value of $150,000 and a beta of 1.32. You have another $61,000 to invest and you would like the beta of your portfolio to decrease to 1.25. What does the beta of the new investment have to be in order to accomplish this?

You have a portfolio of two stocks that has a total value of $32,000. The portfolio is 44 percent

You have a portfolio of two stocks that has a total value of $32,000. The portfolio is 44 percent invested in Stock J. If you own 205 shares of Stock K, what is Stock K's share price?

Cher owns a portfolio that has a value of 72,900 dollars and consists of 3 stocks....

Cher owns a portfolio that has a value of 72,900 dollars and consists of 3 stocks. It has 16,400 dollars worth of stock A, which has a beta of 0.28; it has 2,000 shares of stock B, which has a share price of 8 dollars and a beta of 1.02; and it has some stock C, which has a beta of 1.42. What is the beta of Cher’s portfolio? Round your answer to 2 decimal places (for example, 2.89, 0.70,...

Portfolio A consists of a 2-year zero-coupon bond with a face value of $8,000 and a...

Portfolio A consists of a 2-year zero-coupon bond with a face value of $8,000 and a 10-year zero-coupon bond with a face value of $2,000. The current yield on all bonds is 11.75% per annum. (Answer with two decimal digits accuracy) The duration of portfolio A is

Question