You are considering the construction of a portfolio comprised of equal investments in each of four different stocks. The
Posted: Thu May 19, 2022 12:29 am
You are considering the construction of a portfolio comprised of
equal investments in each of four different stocks. The betas for
each stock are found below:
Asset
Beta
A
2.30
B
0.90
C
0.45
D
−1.40
(Click
on the icon
in order to copy its contents into a
spreadsheet.)
a. What is the portfolio beta for your proposed
investment portfolio?
b. How would a 25 percent increase in the expected return on
the market impact the expected return of your portfolio?
c. How would a 25 percent decrease in the expected return on
the market impact the expected return on each asset?
d. If you are interested in decreasing the beta of your
portfolio by changing your portfolio allocation in
two stocks, which stock would you decrease and which would
you increase? Why?
equal investments in each of four different stocks. The betas for
each stock are found below:
Asset
Beta
A
2.30
B
0.90
C
0.45
D
−1.40
(Click
on the icon
in order to copy its contents into a
spreadsheet.)
a. What is the portfolio beta for your proposed
investment portfolio?
b. How would a 25 percent increase in the expected return on
the market impact the expected return of your portfolio?
c. How would a 25 percent decrease in the expected return on
the market impact the expected return on each asset?
d. If you are interested in decreasing the beta of your
portfolio by changing your portfolio allocation in
two stocks, which stock would you decrease and which would
you increase? Why?