Question

Please answer all questions listed

vuoi 0:00 20 5 of 8 (2 complete) HW Score: 28.75%, 28.75 of 100 pts P8-33 (similar to) Question Help Different investor weights. Two risky portfolios exist for investing: one is a bond portfolio with a beta of 0.7 and an expected return of 7.1%, and the other is an equity portfolio with a beta of 1.4 and an expected return of 14.9%. If these portfolios are the only two available assets for investing, what combination of these two assets will give the following investors their desired level of expected return? What is the beta of each investor's combined bond and equity portfolio? a. Bart: desired expected return 14% b. Lisa: desired expected return 12% c. Maggie: desired expected return 10% a. The combination of these two assets that will give Bart an expected return of 14% is answers to two decimal places.) % in bonds and % in stocks. (Round both Enter your answer in the edit fields and then click Check Answer. 5 parts remaining Clear All Check Answer 3,283 A 200K

Answer 1

1.
Bart:
w*7.1%+(1-w)*14.9%=14%
=>w=(14%-14.9%)/(7.1%-14.9%)

11.53846% in bonds and 88.46154% in stocks

Beta=11.53846%*0.7+88.46154%*1.4=1.31923078

2.
Lisa:
w*7.1%+(1-w)*14.9%=12%
=>w=(12%-14.9%)/(7.1%-14.9%)

37.17949% in bonds and 62.82051% in stocks

Beta=37.17949%*0.7+62.82051%*1.4=1.13974357

3.
Maggie:
w*7.1%+(1-w)*14.9%=10%
=>w=(10%-14.9%)/(7.1%-14.9%)

62.82051% in bonds and 37.17949% in stocks

Beta=62.82051%*0.7+37.17949%*1.4=0.96025643