Portfolio and Stock Beta
Not what you're looking for?
Consider the following information about a five stock portfolio:
Stock Percent of Portfolio Beta
A) 20% 1.6
B) 25% 1.2
C) 10% 1.0
D) 30% 0.9
E) 15% 0.8
a. Determine the portfolio beta for the above portfolio. Show all work.
b. Determine the expected return on the portfolio based on a Treasury bill yield of 4% and an expected market return of 13%. Show all work.
c. The CFO of your firm asks you to precisely explain the methodology that you have used in both part a) and part b) above. Please do this.
d. Determine the expected return on stock E using the same market parameters given in part b). Discuss how the risk and return of this stock compares to the market portfolio.
Purchase this Solution
Solution Summary
Provides steps necessary to evaluate the stock percent of portfolio beta.
Solution Preview
a. Portfolio Beta = sum of ( percent invested* Beta)
= .20*1.6+.25*1.2 + .10*1+.30*.9+.15*.8 = 1.11
b. Expected Return = Treasury Bill + (market return - treasury ...
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
Recent Feedback
- "Your explanation to the answers were very helpful."
- "What does 1 and 0 means in the repair column?"
- "Went through all of the formulas, excellent work! This really helped me!"
- "try others as well please"
- "Thank you, this helped a lot. I was not sure how to plug in those numbers to a formula. This was a great help. Now I have to figure out how to explain cost of capital is used in net present value analysis, and how cost of capital is used in net present value analysis. This stuff gets confusing."
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.