if she still wants to invest in this portfolio , what should she do in terms * a
ID: 2807072 • Letter: I
Question
if she still wants to invest in this portfolio , what should she do in terms* answer ((((((((((((E,F )))))))))))))))))))
Selena invests the following sum of money in common stock having expected ret urns as f Common Stock Amount Invested in Return Expected Beta of Stock WOOPS KBOOM 10,000 JUDY UPDWN SPROUT RINGG EIEIO 5,000 6,000 8,000 4,500 7,500 9,000 0.14 0.16 0.17 0.13 0.20 0.15 0.18 0.6 0.8 0.85 0.5 0.65 0.9 D c b) Calculate the systematic risk, of the portfolio. c) Does the portfolio have more or less systematic risk compared to the average mark d) If return on the market (Rm) is 14% and the risk free rate (R) is 4%, what would be e) If Selena wants to get 12% return from this portfolio, is this the appropriate portfo f) If she still wants to invest in this portfolio, what should she do in terms of adjusti portfolio? of the portfolio according to Capital Asset Pricing Model (CAPM)? Explain your reason using your answer in (A) and (D). weight of the stock? Give your answer based on the amount invested in UPDwN SPROUT stocks.
Explanation / Answer
e)
CAPM return is calculated as risk free rate + beta * (market return - risk free rate)
The average return from the portfolio is 11.7% (sum of return / sum of amount) which can be rounded off to 12%, so it is good enough
f) If she wants to get exactly 12%, updown amount decreased to 4750 and sprout amount increased to 7750
amount exp return beta CAPM return return 5000 0.14 0.6 10.0% 500 10000 0.16 0.8 12.0% 1200 6000 0.17 0.85 12.5% 750 8000 0.13 0.5 9.0% 720 4500 0.2 1.1 15.0% 675 7500 0.15 0.65 10.5% 787.5 9000 0.18 0.9 13.0% 1170Related Questions
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