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A stock has a beta of 1.27 and an expected return of 12.5 percent. A risk-free asset currently earns 4.15 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 .87, what are the portfolio weights? (Do not round intermediate calculations and 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 11.7 percent, what is its beta? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Beta

d. If a portfolio of the two assets has a beta of 2.47, what are the portfolio weights? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and 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.:- M92744206

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