#19 | |||||
We have the following data: | |||||
BETA | 1.23 | ||||
ER Individual Stock | 11.70% | ||||
Risk-Free Rate | 3.50% | ||||
Let's say a portfolio was two equally divided assets. What is the Expected Return of the Portfolio? | |||||
If the Portfolio had a BETA of .7, what are the portfolio weights? |
Portfolio ret is weighted avg ret of securities in that portfolio.
Security | Weight | ret | Wtd Ret |
Stock | 0.5 | 11.70% | 5.85% |
Risk Free Asset | 0.5 | 3.50% | 1.75% |
Portfolio Ret | 7.60% |
Weight of STock = Portfolio Beta / Stock beta
= 0.7 / 1.23
= 0.5691 i.e 56.91%
Weight in Risk free Asset is 1 - Weight of stock
= 1 - 0.5691
= 0.4309 i.e 43.09%
Pls comment, if any further assistance is required
#19 We have the following data: BETA 1.23 ER Individual Stock 11.70% Risk-Free Rate 3.50% Let's...
#19 We have the following data: BETA 1.23 ER Individual Stock 11.70% Risk-Free Rate 3.50% Let's say a portfolio was two equally divided assets. What is the Expected Return of the Portfolio? If the Portfolio had a BETA of .7, what are the portfolio weights?
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