Asset W has an expected return of 8.8 percent and a beta of .90. If the risk-free rate is2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset.(Do not round intermediate calculations. Enter your expected returns as a percentrounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places,e.g., 32.161.)Portfolio ExpectedPercentage of Portfolio inAsset WPortfolioReturnBeta0 %2.60 %254.15 %0.225505.70 %0.450757.25 %0.6801008.80 %0.90012510.35 %1.13015011.90 %1.350If you plot the relationship between portfolio expected return and portfolio beta, what isthe slope of the line that results? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)Slope of the line Consider the following information about three stocks:Rate of Return If State OccursProbability of Stateof EconomyState of EconomyStock AStock BStock CВoom.25.13.29.60Normal.60.08.11.13Bust.15.02-18-.45your portfolio is invested 40 percent each in A and B and 20 percent in C, what isthe portfolio expected return? (Do not round intermediate calculations and enteryour answer as a percent rounded to 2 decimal places, e.g., 32.16.)a- What is the variance? (Do not round intermediate calculations and round2. your answer to 5 decimal places, e.g., .16161.)a- What is the standard deviation? (Do not round intermediate calculations and enter3. your answer as a percent rounded to 2 decimal places, e.g., 32.16.)b. If the expected T-bill rate is 3.70 percent, what is the expected risk premium on theportfolio? (Do not round intermediate calculations and enter your answer as apercent rounded to 2 decimal places, e.g., 32.16.)c-1.If the expected inflation rate is 3.30 percent, what are the approximate and exactexpected real returns on the portfolio? (Do not round intermediate calculations andenter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)c- What are the approximate and exact expected real risk premiums on the portfolio?2. (Do not round intermediate calculations and enter your answers as a percentrounded to 2 decimal places, e.g., 32.16.)а-1.IfX Answernot complete.a-1. Portfolio expected return11.01%a-2. Variance0.01841a-3. Standard deviation13.57%b. Expected risk premium7.31%c-1. Approximate expected real return7.71 O %c-1. Exact expected real return7.46%c-2. Approximate expected real risk premium%c-2. Exact expected real risk premium%

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Asset W has an expected return of 8.8 percent and a beta of .90. If the risk-free rate is 2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations. Enter your expected returns as a percent rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places, e.g., 32.161.) Percentage of Portfolio in Asset W Portfolio Expected Return Portfolio Beta 0 % 2.60 % 25 4.15 % 0.225 50 5.70 % 0.450 75 7.25 % 0.680 100 8.80 % 0.900 125 10.35 % 1.130 150 11.90 % 1.350 If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Slope of the line %

Asset W has an expected return of 8.8 percent and a beta of .90. If the risk-free rate is 2.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Do not round intermediate calculations. Enter your expected returns as a percent rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places, e.g., 32.161.) Percentage of Portfolio in Asset W Portfolio Expected Return Portfolio Beta 0 % 2.60 % 25 4.15 % 0.225 50 5.70 % 0.450 75 7.25 % 0.680 100 8.80 % 0.900 125 10.35 % 1.130 150 11.90 % 1.350 If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Slope of the line %

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 9PROB

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