Explore BrainMass

Explore BrainMass

    Portfolio and Stock Beta

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com March 4, 2021, 5:56 pm ad1c9bdddf
    https://brainmass.com/business/finance/portfolio-stock-beta-19521

    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 ...

    Solution Summary

    Provides steps necessary to evaluate the stock percent of portfolio beta.

    $2.49

    ADVERTISEMENT