Question Details

(Solution Download) Stock J has a beta of 1.22 and an expected return of 13.26 percent, while Stock K has a beta of 0.77


 

 

 

 

 

 

 

Stock J has a beta of 1.22 and an expected return of 13.26

 

percent, while Stock K has a beta of 0.77 and an expected return of

 

10.2 percent. You want a portfolio with the same risk as the

 

market.

 

 

 

 

 

 

 

 

 

 

 

Requirement

 

1:

What is the portfolio weight of

 

each stock? (Do not round intermediate calculations. Round

 

your answers to 4 decimal places (e.g., 32.1616).)

 

 

 

 

 

 

 

 

 

 

 

 

  Stock J

 

  

  Stock K

 

  

 

 

 

 

 

 

 

 

 

 

Requirement

 

2:

 

What is the expected return of your portfolio?

 

(Do not round intermediate calculations.

 

Enter your answer as a percentage rounded to 2

 

decimal places (e.g., 32.16).)

 

 

 

 

 

 

 

 

 

  Expected return of

 

the portfolio

 

%  

 

 

 

 

 

 

 

You have a portfolio with the

 

following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

StockNumber of

 

Shares

PriceExpected

 

Return

W875

 

             

$ 52

 

          

14%

 

        

X775

 

             

29

 

          

18

 

           

Y525

 

             

65

 

          

16

 

           

Z750

 

             

50

 

          

17

 

           

 

 

 

 

 

 

 

 

 

 

Required:
What is the expected return of

 

your portfolio? (Do not round intermediate

 

calculations. Enter your answer as a percentage

 

rounded to 2 decimal places (e.g.,

 

32.16).)

 

 

 

 

 

 

 

 

  Expected return of

 

the portfolio

 

%  

 

 

 

 

 

 

 

 

You want to create a portfolio equally as risky as the market,

 

and you have $500,000 to invest. Information about the possible

 

investments is given below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Asset

 

Investment

Beta
  Stock A$133,000

 

     

.78

 

     

  Stock B$

 

147,000      

1.23

 

     

  Stock C1.38

 

     

 

  Risk-free asset

 

 

 

 

 

 

 

Requirement

 

1:

 

 

 

 

 

 

 

 

How much will you invest in Stock C? (Do not round

 

intermediate calculations. Round your answer to 2 decimal places

 

(e.g., 32.16).)

 

 

 

 

 

 

 

 

 

  Investment in Stock

 

C

 

$   

 

 

 

 

 

 

 

 

 

 

Requirement

 

2:

 

How much will you invest in the risk-free asset? (Do not

 

round intermediate calculations. Round your answer to 2 decimal

 

places (e.g., 32.16).)

 

 

 

 

 

 

 

 

 

  Investment in

 

risk-free asset

 

$   

 


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QUALITY

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DATE ANSWERED

Dec 08, 2020

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