You have observed the following returns over time: Year Stock X Stock Y Market 2

Question

You have observed the following returns over time:
Year Stock X Stock Y Market
2006 14% 11% 13%
2007 18 6 12
2008 -13 -3 -13
2009 4 2 1
2010 19 12 17
Assume that the risk-free rate is 3% and the market risk premium is 14%

What is the beta of Stock X? Round your answer to two decimal places.
What is the beta of Stock Y? Round your answer to two decimal places.
What is the required rate of return on Stock X? Round your answer to two decimal places.
What is the required rate of return on Stock Y? Round your answer to two decimal places
What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y? Round your answer to two decimal places

Explanation / Answer

Go to this link if you want to look at the work, its google docs spreadsheet.

https://docs.google.com/spreadsheet/ccc?key=0AqFfmpAerqFgdHQyV1ZTZnU5eGdmU0RDT3dHeXhhc1E#gid=0

If you can't open it then give me your email and I will send you the original file.

Beta for stock X 1.08 Beta for stock Y 0.49
Required return on stock X 8.40% Required return on stock Y 5.60%
Stock X Stock Y Weights 80% 20% Return 8.40% 5.60%

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