A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free a

Question

A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset currently earns 3.85 percent.

What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

If a portfolio of the two assets has a beta of 0.81, what are the portfolio weights? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)

If a portfolio of the two assets has an expected return of 11.1 percent, what is its beta? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

If a portfolio of the two assets has a beta of 2.41, what are the portfolio weights? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)

A stock has a beta of 1.21 and an expected return of 11.9 percent. A risk-free asset currently earns 3.85 percent.

Explanation / Answer

a- Expected REturn is 7.88%

Working:

b-

Weight of Stock-.67

Weight of Beta -.33

Working:

d-

Weight of Stock- 1.99

Weight of Beta - (-).99

Particulars Weight * Expected Return = Weighted Return Stock 0.5 * 11.90 = 5.95 Risk free Assets 0.5 * 3.85 = 1.93 Total 7.88

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