Determine the expected return on your portfolio. determine, Ask an Expert

Finance

Assume you own a portfolio consisting of the following stocks:

Stock Percentage of Portfolio Beta (β) Expected Return
1 20% 1.00 16%
2 30% 0.85 14%
3 15% 1.20 20%
4 25% 0.60 12%
5 10% 1.60 24%

a. Determine the expected return on your portfolio.

b. Determine the portfolio beta (βP).

c. Given the portfolio beta and the assumptions that the risk-free rate (rRF) is 7 percent and the expected return on the market portfolio (rMKT) is 15.5 percent, present the equation for the security market line (SML).

d. Based on your equation for the SML and the expected returns from the data in the table, which stocks appear to be winners (i.e., underpriced) and which stocks appear to be losers (i.e., overpriced)?

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M940688

Have any Question?Write your Review or question?

Related Questions in Basic Finance

A stock is trading at 78 per share the stock is expected to

A stock is trading at $78 per share. The stock is expected to have a year-end dividend of $5 per share (D1=$5), which is expected to grow at some constant rate g throughout time. The stock's required rate of return is 15 ...

Your firm spends 5200 every month on printing and mailing

Your firm spends $ 5,200 every month on printing and mailing? costs, sending statements to customers. If the interest rate is 0.52% per? month, what is the present value of eliminating this cost by sending the statements ...

You have a portfolio of 5 stocks that have a total value of

You have a portfolio of 5 stocks that have a total value of $40,000. The beta coefficient of this portfolio is 1.2. You want to invest an additional $10,000 in a stock that has beta equal to 2.2. After adding this, what ...

Youve decided to invest your 5000 into a firm specializing

You've decided to invest your $5,000 into a firm specializing in making mobile apps. Your advisor suggest that you should be able to earn 5% annually (paid to you semi-annually). What is your expected future value in 3 y ...

What are the differences between the federal deficit and

What are the differences between the Federal deficit and Federal Debt? How does a government budget deficit affect the economy, specifically the unemployment rate and job creation? Identify two periods in recent history ...

The global network has sales of 421945 cost of goods sold

The Global Network has sales of $421945, cost of goods sold of $270002, and inventory of $33598. What is the inventory turnover rate? Round your answer to the nearest hundredth.

What is firm level strategy in business define and

What is firm level strategy in business? Define and explain

A company has 6 percent coupon compounded semiannually

A company has 6 percent coupon (compounded semiannually) bonds on the market with 15 years to maturity, and the par value of $1,000. At what price should the bonds be selling for if YTM is 7%? Had the bond been selling a ...

A study finds that the prices of stocks prior to large

A study finds that the prices of stocks prior to large dividend increases show on average consistently positive abnormal returns. Is this a violation of the efficient market hypothesis? Explain

What is the annual yield to maturity ytm of a 10-year bond

What is the annual yield to maturity (YTM) of a 10-year bond, $1000 par, 8% coupon paid semi-annually, currently selling for $975?

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert