Question

In: Finance

Your portfolio contains Stocks X and Y with the following dollaramount of investments: Stock X...

Your portfolio contains Stocks X and Y with the following dollar amount of investments: Stock X Y Investment $5,000 $15,000 The portfolio has a beta of 1.2. If you add Stock Z into your portfolio with an investment of $10,000, what is the beta of your new portfolio if Stock Z has a beta equal to 3?

Solutions

Expert Solution

Portfolio Beta is weighted Avg beta of securities in that portfolio

Security Amount Weights Beta Wtd Beta
Old Portfolio $    20,000.00     0.6667 1.20      0.8000
Stock Z $    10,000.00     0.3333 3.00      1.0000
New Portfolio Beta      1.8000

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Tim sets up a portfolio of two stocks: stock X and stock Y. Heplans to...
Tim sets up a portfolio of two stocks: stock X and stock Y. He plans to put 40% of the funding in Stock X, and the rest in Stock Y. If Stock X’s return is 15%, whereas stock Y’s return is 22%, Calculate his portfolio return (rp). (you MUST show your work to earn ANY credit)
Your client wants to construct a portfolio from two stocks (Stocks Y and Z) and has...
Your client wants to construct a portfolio from two stocks (Stocks Y and Z) and has asked you to determine the portfolio weights for each stock that will generate the portfolio with the smallest standard deviation. Use the relevant information in the table below to calculate the standard deviation for each portfolio weighting scenario and indicate the scenario that you should recommend to your client. Stock Y Stock Z Portfolio Weighting Scenario 1 60% 40% Portfolio Weighting Scenario 2 70%...
Suppose that you want to create a portfolio that consists of stock X and stock Y....
Suppose that you want to create a portfolio that consists of stock X and stock Y. For a​ $1,000 investment, the expected return for stock X is $ 71 and the expected return for stock Y is $ 102. The variance for stock X is 2,700 and the variance for stock Y is 8,625. The covariance of stock X and stock Y is 5,976. Complete parts​ (a) through​ (c). a.) Compute the portfolio expected return and portfolio risk if the...
A portfolio manager is holding the following investments: Stock Amount Invested Beta X $10 million 1.4...
A portfolio manager is holding the following investments: Stock Amount Invested Beta X $10 million 1.4 Y 20 million 1.0 Z 40 million 0.8 The manager plans to sell his holdings of Stock Y. The money from the sale will be used to purchase another $15 million of Stock X and another $5 million of Stock Z. The risk-free rate is 5% and the market risk premium is 5.5%. How many percentage points higher will the required return on the...
A portfolio manager is holding the following investments: Stock Amount Invested Beta X $12 million 1.4...
A portfolio manager is holding the following investments: Stock Amount Invested Beta X $12 million 1.4 Y 25 million 1.0 Z 40 million 0.6 The manager plans to sell his holdings of Stock Y. The money from the sale will be used to purchase another $15 million of Stock X and 10 million of Stock Z. The risk-free rate is 5 percent and the market risk premium is 5.5 percent. How many percentage points higher will the required return on...
There are 2 stocks in your portfolio. You own 65% of Stock A and 35% of...
There are 2 stocks in your portfolio. You own 65% of Stock A and 35% of stock B. The expected returns on each stock with the probability of those returns are: State of the Economy Probability Stock A Stock B Recession 30% -15 -6 Normal 45% +12 + 8 Boom 25% +30 +19 What is the variance of each stock? What is the standard deviation of each stock? What is the expected return of each stock and the expected return...
A portfolio consists of 50% invested in Stock X and 50% invested in Stock Y. We...
A portfolio consists of 50% invested in Stock X and 50% invested in Stock Y. We expect two probable states to occur in the future: boom or normal. The probability of each state and the return of each stock in each state are presented in the table below. State Probability of state Return on Stock X Return on Stock Y Boom 20% 25% 35% Normal 80% 10% 5% What are the expected portfolio return and standard deviation? Select one: a....
Your portfolio contains $4,815 worth of PG and $4,397 worth of HD stocks. What is the...
Your portfolio contains $4,815 worth of PG and $4,397 worth of HD stocks. What is the beta of your portfolio, if PG's beta is 0.8 and HD's beta is 1.5%? Assume that the CAPM holds. Provide your answer rounded to two decimals.
The following table contains the historic returns from a portfolio consisting of large stocks and a...
The following table contains the historic returns from a portfolio consisting of large stocks and a portfolio consisting of long-term Treasury bonds over the last 20 years. T-bills returns represent risk-free returns. Analyze the risk-return trade-off that would have characterized these portfolios. The following dataset is also available in Excel format in Module 3 Resources on Canvas. Returns in the dataset are in percents. For example, 31.33 means 31.33% per year. Year Large Stock Long-Term T-Bonds T-Bills 1997 31.33 11.312...
The following table contains the historic returns from a portfolio consisting of large stocks and a...
The following table contains the historic returns from a portfolio consisting of large stocks and a portfolio consisting of long-term Treasury bonds over the last 20 years. T-bills returns represent risk-free returns. Analyze the risk-return trade-off that would have characterized these portfolios. The following dataset is also available in Excel format in Module 3 Resources on Canvas. Returns in the dataset are in percents. For example, 31.33 means 31.33% per year. Year Large Stock Long-Term T-Bonds T-Bills 1997 31.33 11.312...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT