19 - Consider a well-diversified portfolio, A, in a two-factor economy. The risk-free rate is 6%, the risk premium on th first factor portfolio is 4%, and the risk premium on the second factor portfolio is 3%. If portfolio A has a beta ot 1.2 on the first factor and 0.4 on the second factor, what is its expected return? a) 8.0% b) 13.2% 12.0% d) 7.0% o1383176 9.2%

19 - Consider a well-diversified portfolio, A, in a two-factor economy. The risk-free rate is 6%, the risk premium on th first factor portfolio is 4%, and the risk premium on the second factor portfolio is 3%. If portfolio A has a beta ot 1.2 on the first factor and 0.4 on the second factor, what is its expected return? a) 8.0% b) 13.2% 12.0% d) 7.0% o1383176 9.2%

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: The Basic Tools Of Finance

Section: Chapter Questions

Problem 5QCMC

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5. Find the expected value assuming the risk factor is 30 % and the interest rate is 12% , if you will receive $20,000 one year from today.
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5. You have been hired as a portfolio manager for a fancy hedge fund. Your first job is to invest $100,000 in a portfolio of two assets. The first asset is a safe asset with a certain return of 5%. The second asset is shares of a dying video-game store that has become popular with retail investors, it has a 20% expected rate of return, but the standard deviation of this return is 10%. Your manager wants a portfolio with as high a rate of return as possible while keeping the standard deviation at or below 4%. How much of the fund's money do you invest in the safe asset?
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