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A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete and correct. Expected return 6.50 % b. If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Stock Risk-free asset Portfolio Weight % %

A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete and correct. Expected return 6.50 % b. If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Stock Risk-free asset Portfolio Weight % %

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 15P
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A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete and correct. Expected return 6.50 % b. If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Stock Risk-free asset Portfolio Weight % %
Transcribed Image Text:A stock has a beta of 0.9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete and correct. Expected return 6.50 % b. If a portfolio of the two assets has a beta of 0.5, what are the portfolio weights? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Stock Risk-free asset Portfolio Weight % %
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