1-Problem 10-11 Portfolio Beta (LG10-3) You have a portfolio with a beta of 1.83

Question

1-Problem 10-11 Portfolio Beta (LG10-3)

You have a portfolio with a beta of 1.83. What will be the new portfolio beta if you keep 91 percent of your money in the old portfolio and 9 percent in a stock with a beta of 0.94? (Do not round intermediate calculation and round your answer to 2 decimal places.)

new portfolio beta = .........%

2-Problem 10-15 Required Return (LG10-7)

Paccar’s current stock price is $110.30 and it is likely to pay a $3.18 dividend next year. Since analysts estimate Paccar will have an 12.8 percent growth rate, what is its required return? (Round your answer to 2 decimal places.)

required return = ......%

Explanation / Answer

1.Portfolio beta=Respective betas*Respective investment weights

=(1.83*0.91)+(0.09*0.94)=1.75(Approx_).

2.Required return=(Dividend for next period/Current price)+Growth rate

=(3.18/110.30)+0.128=15.68%(Approx).

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