Question

1. A portfolio with a beta of .90 contains 3 stocks as outlined below. What is the beta for Stock C?

Stock	Market Value	Beta
A	20,000	1.07
B	15,000	0.70
C	10,000	X

A. 0

C. 0.71

C. 0.86

D. 1

E. 1.20

2. An investment earned the following annual returns. What is the average annualized compounded return?

Year	Return
1	-1.50%
2	-2.63%
3	-3.49%
4	-4.50%
5	-6.00%
6	17.50%

A. -.10%

B. -.40%

C. -.48%

D. -13.38%

Answer 1

1)

beta of portfolio = weighted average beta

=>

0.9 = (20000/45000) * 1.07 + (15000/45000) * 0.7 + (10000/45000) * x

=>

x = 0.86

choose C)

2)

Annualized return = [ (1-0.015) * (1-0.0263) * (1-0.0349) * (1-0.045) * (1-0.06) * (1+0.175) ]^(1/6) - 1

= -0.40%

hence choose B)