1. A portfolio is comprised of the following stocks. What is the portfolio beta?
|
Stock
|
Market Value of Shares
|
Beta
|
|
A
|
$ |
11,000
|
|
1.64
|
|
B
|
$ |
16,000
|
|
.92
|
|
C
|
$ |
8,000
|
|
1.13
|
1.26
1.07
1.19
1.34
2. You own a $55,000 portfolio that is invested in a risk-free security and Stock A. The beta of Stock A is 2.30 and the portfolio beta is .90. What is the amount of the investment in Stock A?
$21,522
$18,882
$22,342
$24,082
3. Stock A has a beta of 2.9 and an expected return of 13.9 percent. Stock B has a beta of 1.21 and an expected return of 18.20 percent. At what risk-free rate would these two stocks be correctly priced?
21.28 percent
19.10 percent
19.98 percent
20.67 percent
4. You own a portfolio that has $3,300 invested in Stock A and $4,300 invested in Stock B. If the expected returns on these stocks are 11 percent and 14 percent, respectively, what is the expected return on the portfolio? A percent rounded to two decimal places.
5. Consider the following information:
| State of Economy |
Probability of
State of Economy |
Portfolio Return
If State Occurs |
| Recession |
|
.23 |
|
- |
.17 |
|
| Normal |
|
.48 |
|
|
.13 |
|
| Boom |
|
.29 |
|
|
.39 |
Calculate the expected return.