Question

The following three stocks are available in the market:

  

	E(R)		β
Stock A	10.9	%	1.18
Stock B	12.8		.98
Stock C	15.3		1.38
Market	14.3		1.00

  

Assume the market model is valid.

  

The return on the market is 15.1 percent and there are no unsystematic surprises in the returns. What is the return on each stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

	Return
Stock A	n/r   %
Stock B	n/r   %
Stock C	n/r   %

  

Assume a portfolio has weights of 35 percent Stock A, 50 percent Stock B, and 15 percent Stock C. The return on the market is 15.1 percent and there are no unsystematic surprises in the returns. What is the return on the portfolio? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

  

Return on the portfolio

n/r   %

Answer 1

Date Page No. Shivglal Beta - Change in Security Change in Market in Market (15.1%.-14.3%) = 0.8%.. Change Now Change in Security = Beta * 0.8 % (a) Return of Stock = {(R) + Change "A E(R) + Bela * 0.8% In Security A Retween 10.9% * 1.18. (0.8%) -) (1.8442 B Tu I Stock Return 12.8% *0.98(0.8%) 1 13:5844 In Stock C Retwin & = 15:3% * 0 1.38 (0.8%) 16.404 %

Page No. 13 Shivglal Return of Portfolio - (WA*RA) + (WB * RB) + (We* Re) > (35% * 11.8442) + (50%* 13.5841.). + (15% * 16.404 %) * 4.145% + 6.792% +2.46 = 13.398 %