a. Consider a portfolio, made up by selling short $10,000 of Contravent stocks and buying $10,000 of Sensor and $5000 of Cosmo. How sensitive will this portfolio be to each of the three factors? b. What is the expected return of your portfolio in (a) if the expected return on the S&P 500 index is 15%, the expected return on the SMB factor is 4%, the expected return on the HML factor is 2% and the risk free rate is 0.5% c. What is the systematic volatility (standard deviation of returns) of your portfolio in (a) given that the volatility of the S&P 500 index is 16%, the volatility of the SMB factor is 20% and the volatility of HML factor is 10%?

a. Consider a portfolio, made up by selling short $10,000 of Contravent stocks and buying $10,000 of Sensor and $5000 of Cosmo. How sensitive will this portfolio be to each of the three factors? b. What is the expected return of your portfolio in (a) if the expected return on the S&P 500 index is 15%, the expected return on the SMB factor is 4%, the expected return on the HML factor is 2% and the risk free rate is 0.5% c. What is the systematic volatility (standard deviation of returns) of your portfolio in (a) given that the volatility of the S&P 500 index is 16%, the volatility of the SMB factor is 20% and the volatility of HML factor is 10%?

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

9th Edition

ISBN:9781305635937

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 8DQ: Beta pf CPB company Beta of the MSI Company is 0.19. The beta of TIF Company is 1.76. Repeat the...

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