1.A portfolio has 85 shares of Stock A that sell for $36 per share and 125 share

Question

1.A portfolio has 85 shares of Stock A that sell for $36 per share and 125 shares of Stock B that sell for $28 per share.

You own a portfolio that has $1,750 invested in Stock A and $3,800 invested in Stock B. If the expected returns on these stocks are 8 percent and 15 percent, respectively, what is the expected return on the portfolio?(Do not round your intermediate calculations.)

4.

A portfolio is invested 20 percent in Stock G, 65 percent in Stock J, and 15 percent in Stock K. The expected returns on these stocks are 5 percent, 19 percent, and 28 percent, respectively. What is the portfolio's expected return?

You own a stock portfolio invested 20 percent in Stock Q, 25 percent in Stock R, 15 percent in Stock S, and 40 percent in Stock T. The betas for these four stocks are 0.71, 1.73, 1.37, and 0.91, respectively. What is the portfolio beta?

A stock has a beta of 0.95, the expected return on the market is 18 percent, and the risk-free rate is 8.1 percent. What must the expected return on this stock be?

A stock has an expected return of 15 percent, its beta is 0.45, and the risk-free rate is 8.25 percent. What must the expected return on the market be?

9.A stock has an expected return of 14 percent, its beta is 1.35, and the expected return on the market is 11 percent. What must the risk-free rate be? (Do not round your intermediate calculations.)

1.A portfolio has 85 shares of Stock A that sell for $36 per share and 125 shares of Stock B that sell for $28 per share.

Explanation / Answer

portfolio weight of Stock A = 36*85/(36*85+28*125) = .4664 = 46.64%

portfolio weight of Stock B = 1-.4664 = .53336 = 53.36%

E(Rp) = 1750/(1750+3800)*8 + 3800/(1750+3800)*15 = 12.79%

E(Rp) = .20*.05 + .65*.19 + .15*.28 = 17.55%

betap = .2*.71 + .25*1.73 +.15*1.37 + .4*.91 = 1.144

beta market = 1

weight = 1/3
beta stock1 = 1.15, beta risk free=0

1 = 1/3*1.15 + 1/3*beta stock2

beta stock2 = 1.85

E(R) = 8.1 + .95(18-8.1) = 17.51%

15 = 8.25 + .45(Rm - 8.25)

Rm = 23.25%

14 = Rf + 1.35(11-Rf)

.35Rf = 14.85-14

Rf = .85/.35 = 2.43%

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