Question
Asked Nov 24, 2019
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If a portfolio of the two assets has a beta of .99, what are the portfolio weights? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
 

   
Weight of stock  
Risk-free weight  
 
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Expert Answer

Step 1

Hi. Since there is no information given regarding the beta of stock, we are randomly assuming the beta as 1.40. Kindly replace with the original beta values given.

Step 2

Calculation of Portfolio Weights:

The weight of stock is 70.71% and the weight of risk-free asset is 29.29%.

Excel Spreadsheet:

...
A
В
1 Portfolio Beta
0.99
2 Stock Beta
1.4
Weight of Stock
Weight of Riskfree Asset
3
70.71%
4
29.29%
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A В 1 Portfolio Beta 0.99 2 Stock Beta 1.4 Weight of Stock Weight of Riskfree Asset 3 70.71% 4 29.29%

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