You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 17 percent. If Stock X has an expected return of 14.8 percent and a beta of 1.35, and Stock Y has an expected return of 11.2 percent and a beta of .90, how much money will you invest in Stock Y? How do you interpret your answer? What is the beta of your portfolio?

You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a portfolio that has an expected return of 17 percent. If Stock X has an expected return of 14.8 percent and a beta of 1.35, and Stock Y has an expected return of 11.2 percent and a beta of .90, how much money will you invest in Stock Y? How do you interpret your answer? What is the beta of your portfolio?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A portfolio worth $5,500 is invested in Stocks A and B plus a risk-free asset. A total of $2,500 is invested in Stock A with a beta of 1.27. Stock B has a beta of .89. How much needs to be invested in Stock B if the goal is to create a portfolio that will mimic the entire market? Multiple Choice $1,482.08 $3,408.15 −$894.20 $2,266.67 $2,612.36
You want to create a portfolio equally as risky as the market, and you have $5M to invest. Given the information below, what is your investment in the risk-free asset? Asset Stock A Stock B Stock C Risk-free Asset $0.8M $0.7M $0.9M $1.1M Investment $1M $2M Beta 0.7 1.25 1.5
You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock A B с Investment Beta $202,000 303,000 505,000 Beta of the portfolio 1.59 Expected rate of return 0.59 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 15 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) 1.16 %
A4 a. Suppose we have two risky assets, Stock I and Stock J, and a risk-free asset. Stock I has an expected return of 25% and a beta of 1.5. Stock J has an expected return of 20% and a beta of 0.8. The risk-free asset’s return is 5%. a. Calculate the expected returns and betas on portfolios with x% invested in Stock I and the rest invested in the risk-free asset, where x% = 0%, 50%, 100%, and 150%.
Suppose you have the following investments: Security Amount Invested Expected Return Beta A $2,000 5% .80 B $4,000 10% .95 C $6,000 15% 1.10 D $8,000 18% 1.40 What is the beta of the portfolio? Select one: a. 1.16 b. 0.59 c. 1.34 d. 1.20
You decide to form a portfolio of the following amounts invested in the following stocks. What is the beta of the portfolio? SET YOUR CALCULATOR TO 4 DECIMAL PLACES THEN INPUT THE ANSWER ROUNDING TO 2 DECIMALS i.e. if your answer is 1.2455, enter it as 1.25. Amount Beta Expected Return $9,370 0.69 10.50% Microsoft $5,598 1.6 16.90% $4,261 1.1 15.75% $4,668 2.39 11.80% Stock Apple Ford Time Warner
You have a portfolio worth $75,000 consisting of 15 stocks with $5,000 invested in each. The portfolio's beta is 1.20. You plan to sell a stock with a beta of 0.8 and use the proceeds to buy a new stock with a beta of 1.6. What will the beta of the new portfolio? a. 1.25 Ob.2.0 c. 1.58 d. 1.42
16. Assume the betas for securities A, B, and C are as shown here. (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Security A B C .673 Beta If you have a portfolio with $30,000 invested in each of Investment A, B, and C, what is your portfolio beta? Using the portfolio beta and assuming a risk-free rate of 5%, what would you expect the return of your portfolio to be if the market earned 20.8% next year? Declined 19.6%? The beta of your portfolio is (Round to three decimal places.) The return of your portfolio to be if the market earned 20.8% is If the market earned 20.8%, the value of your portfolio is $ The return of your portfolio to be if the market declined 19.6% is If the market declined 19.6%, the value of your portfolio is $ 1.62 0.63 - 0.23 (Round to the nearest dollar.) %. (Round to two decimal places and enter as a negative number if the return decreased.) %. (Round to two decimal places and enter…
h An investor has $1000 initial wealth for investment and he borrows another $500 at the risk free rate. He then invest the entire total amount of $1500 in the market portfolio. What is his portfolio beta? O 0 +2.0 +1.5 -1.0
You are going to invest $20,000 in a portfolio consisting of assets X, Y, and Z, as follows: Asset Annual Return Probability Beta Proportion X 10% 0.50 1.2 0.333 Y 8% 0.25 1.6 0.333 Z 16% 0.25 2.0 0.333 Given the information in Table 5.2, The beta of the portfolio in Table 8.2, containing assets X, Y, and Z is ________. Select one: a. 1.6 b. 2.0 c. 1.5 d. 2.4
Suppose you have the following investments: Security Amount Invested Expected Return Beta A $2,000 5% .80 B $4,000 10% .95 C $6,000 15% 1.10 D $8,000 18% 1.40 What is the expected return on this portfolio? Select one:
Assume the betas for securities A, B, and C are as shown here. (Click on the icon here in order to copy its contents of the data table below into a spreadsheet.) Security Beta A 1.58 B 0.65 C −0.23 If you have a portfolio with $30,000 invested in each of Investment A, B, and C, what is your portfolio beta?

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