A stock has a beta of 115 and an expected return of 104, Ask an Expert

Finance

A stock has a beta of 1.15 and an expected return of 10.4 percent. A risk-free asset currently earns 3.8 percent.

Required:

(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 percentage rounded to 2 decimal places (e.g., 32.16).)

Expected return %

(b) If a portfolio of the two assets has a beta of .7, what are the portfolio weights? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)

Weight of the stock

Weight of the risk-free asset

(c) If a portfolio of the two assets has an expected return of 9 percent, what is its beta? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.162).)

Beta

(d) If a portfolio of the two assets has a beta of 2.3, what are the portfolio weights? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to 4 decimal places (e.g., 32.1616).)

Weight of the stock

Weight of the risk-free asset

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92714531

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