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A stock has a beta of 1.7 and an expected return of 12 percent. A risk-free asset currently earns 2.8 percent.

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

  Expected return _________________ % ?

b. If a portfolio of the two assets has a beta of 1.02, what are the portfolio weights? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Weight of stock__________?

Risk-free weight__________?

c. If a portfolio of the two assets has an expected return of 10 percent, what is its beta? (Do not round intermediate calculations and round your answer to 3 decimal places (e.g., 32.161).)

  Beta_________?

d. If a portfolio of the two assets has a beta of 3.4, what are the portfolio weights? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.)

Weight of stock_______?

Risk-free weight_______?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92372244

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