A stock has a beta of 129 and an expected return of 127, Ask an Expert

Finance

A stock has a beta of 1.29 and an expected return of 12.7 percent. A risk-free asset currently earns 4.25 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 0.89, 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 11.9 percent, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Beta

(d) If a portfolio of the two assets has a beta of 2.49, what are the portfolio weights? (Negative amounts should be indicated by a minus sign. 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

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91601002

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