Jeanne lewis is attempting to evaluate 2 possible


Jeanne Lewis is attempting to evaluate 2 possible portfolios consisting of the same 5 assets but held in different proportions. She is particularly interested in using beta to compare the risk of the portfolios? and, in this? regard, has gathered the following? data:

Portfolio Weights

Asset Asset Beta Portfolio A Portfolio B

1 1.27 6% 25%

2 0.75 30% 13%

3 1.21 10% 25%

4 1.09 10% 16%

5 0.86 44% 21%

Total 100% 100%

a. Calculate the betas for portfolios A and B.

b. If the? risk-free rate is 2.62.6?% and the market return is 9.7?%, calculate the required return for each portfolio using the CAPM.

c. Then assume you now have the following annual returns ? for each? investment:

Asset Returns

1 17.5%

2 13.5%

3 14.0%

4 12.0%

5 8.5%

Using the required return for each portfolio and the additional return? data, determine which portfolio you would choose and explain why.

Request for Solution File

Ask an Expert for Answer!!
Financial Management: Jeanne lewis is attempting to evaluate 2 possible
Reference No:- TGS02673731

Expected delivery within 24 Hours