a) Assuming Treasury bills yield is 1% and the market risk premium is 7%. If your portfolio beta is still 0.25, what is the expected return on this strategy? - b) The following table shows beta for several companies. Calculate each stock's expected rate of return using CAPM, assuming the risk free rate is 4% and the risk premium for the market portfolio is 7%. What is your portfolio beta if you construct an equally weighted portfolio using all stocks? What can you say about this portfolio relative to the market? - Stock Beta Apple 1.35 Johnson & Johnson 0.69 IBM 1.10

a) Assuming Treasury bills yield is 1% and the market risk premium is 7%. If your portfolio beta is still 0.25, what is the expected return on this strategy? - b) The following table shows beta for several companies. Calculate each stock's expected rate of return using CAPM, assuming the risk free rate is 4% and the risk premium for the market portfolio is 7%. What is your portfolio beta if you construct an equally weighted portfolio using all stocks? What can you say about this portfolio relative to the market? - Stock Beta Apple 1.35 Johnson & Johnson 0.69 IBM 1.10

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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