A stock has a beta of 1.25 and an expected return of 15 percent. A risk-free ass

Question

A stock has a beta of 1.25 and an expected return of 15 percent. A risk-free asset currently earns 3.2 percent.

What is the expected return on a portfolio that is equally invested in the two assets? (Round your answer to 2 decimal places. (e.g., 32.16))

If a portfolio of the two assets has a beta of 0.75, what are the portfolio weights? (Round your answer to 4 decimal places. (e.g., 32.1616))

If a portfolio of the two assets has an expected return of 9 percent, what is its beta? (Do not round intermediate calculations and round your answer to 3 decimal places. (e.g., 32.161))

If a portfolio of the two assets has a beta of 2.50, what are the portfolio weights? (Negative amount should be indicated by a minus sign.)

A stock has a beta of 1.25 and an expected return of 15 percent. A risk-free asset currently earns 3.2 percent.

Explanation / Answer

a> Expected Rate of Return=(1.25*15+0*3.2)/2 9.375 b> (1.25*X+0)/(1.5)=0.75 or 1.25X=.75*1.5 or X=1.125/1.25=0.9 = 90% Weight of stock 90% and Riskfree 10%

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