A portfolio contains four assets. Asset 1 has a beta of .8 and comprises 30% of

Question

A portfolio contains four assets. Asset 1 has a beta of .8 and comprises 30% of the portfolio. Asset 2 has a beta of 1.1 and comprises 30% of the portfolio. Asset 3 has a beta of 1.5 and comprises 20% of the portfolio. Asset 4 has a beta of 1.6 and comprises the remaining 20% of the portfolio. If the riskless rate is expected to be 3% and the market risk premium is 6%, what is the beta of the portfolio, the expected return on the portfolio and the market? -- Please answer all questions and provide steps, I want to understand --

Explanation / Answer

bp = .3(.8)+.3(1.1)+.2(1.5)+.2(1.6)=1.19

market = .06+.03= .09

portfolio = sum(b*.09)*% of portfolio

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