(Portfolio beta and CAPM) You are putting together a portfolio made up of four different stocks. However, you are c
Posted: Thu May 19, 2022 12:38 am
(Portfolio beta and CAPM) You are putting together a
portfolio made up of four different stocks. However, you are
considering two possible weightings:
Portfolio Weightings
Asset
Beta
First Portfolio
Second Portfolio
A
2.40
15%
35%
B
0.95
15%
35%
C
0.40
35%
15%
D
−1.40
35%
15%
a. What is the beta on each portfolio?
b. Which portfolio is riskier?
c. If the risk-free rate of interest were
3
percent and the market risk premium were
5.5
percent,
what rate of return would you expect to earn from each of
the portfolios?
portfolio made up of four different stocks. However, you are
considering two possible weightings:
Portfolio Weightings
Asset
Beta
First Portfolio
Second Portfolio
A
2.40
15%
35%
B
0.95
15%
35%
C
0.40
35%
15%
D
−1.40
35%
15%
a. What is the beta on each portfolio?
b. Which portfolio is riskier?
c. If the risk-free rate of interest were
3
percent and the market risk premium were
5.5
percent,
what rate of return would you expect to earn from each of
the portfolios?