IMPORTANT: ACTUAL CALCULATIONS & FORMULAS IN EXCEL USED REQUIRED
PROBLEM
Consider the following three individuals' portfolios consisting of investments in four stocks:
|
Stock
|
Beta
|
John's Investment
|
Frank's Investment
|
Bob's Investment
|
|
Beta
|
1.3
|
2,500
|
5,000
|
10,000
|
|
Capa
|
1.0
|
2,500
|
5,000
|
10,000
|
|
Zeta
|
0.8
|
2,500
|
5,000
|
-5,000
|
|
Hexo
|
-0.5
|
2,500
|
-5,000
|
-5,000
|
Assuming that the risk-free rate is 4% and the expected return on the market is 12%, then calculate the required return on Bob's portfolio.