Intro You've assembled the following portfolio: Stock Exp. return Investment 1 6.9% 2 14.7% 3 16.3% Part 1 What is the expected return of the portfolio? 3+ decimals Submit $5,000 $12,000 $7,000
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Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
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- What is the expected return for the following portfolio? (State your answer in percent with two decimal places.) Stock Expected returns Investment AAA 35% $500,000 BBB 29% $1,300,000 CCC 18% $1,200,000 DDD 7% $1,500,000 O.17.13% O.19.40% O.21.01% O.22.21% O.23.88%You are holding a portfolio with the following investments and betas: Stock Dollar investment Beta А $250,000 1.25 B 200,000 1.70 с 400,000 0.85 D 150,000 -0.25 Total investment $1,000,000 The market's required return is 10% and the risk-free rate is 3%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places. %Calculate the weighted average expected return of the portfolio. Stock Investment Expected ReturnA $20,000 15%B $4,000 10%C $26,000 12%
- Stock Dollar investment Beta A $300,000 1.20 B 200,000 1.60 C 500,000 0.65 D 0 -0.20 Total investment $1,000,000 The market's required return is 10% and the risk-free rate is 3%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places.Quantitative Problem: You are holding a portfolio with the following investments and betas: Stock Dollar investment Beta A $300,000 1.2 B 200,000 1.6 C 400,000 0.75 D 100,000 -0.35 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places.You are holding a portfolio with the following investments and betas: Stock Dollar investment Beta A $250,000 1.30 B 200,000 1.70 C 400,000 0.75 D 150,000 -0.30 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places.
- Consider the following information on two stocks: P(State) Stock A Stock B Boom 20% 30% 20% Normal 50% 12% -5% Slow 15% 4% 8% Recession 15% -10% 10% $Investment Beta Asset A $35,000 1.45 Asset B $15,000 0.85 Q1. Calculate the weight of A in the portfolio. (Enter percentages as decimals and round to 4 decimals) Q2. Calculate the expected return on the portfolio. (Enter percentages as decimals and round to 4 decimals) Q3. Calculate the standard deviation of the portfolio. (Enter percentages as decimals and round to 4 decimals).2-10 We have the following information on a portfolio consisting of Stocks A, B, and C: A B C Expectd annual return 25% 20% 15% Standard Deviation of Return 35% 30% 25% Price per share 100 85 75 # shares 100,000 150,000 200,000 _______________________________________________________________________________________ correlation coefficient (A,B)…Quantitative Problem: You are holding a portfolio with the following investments and betas: Stock Dollar investment Beta A $300,000 1.3 B 200,000 1.6 C 500,000 0.75 D 0 -0.15 Total investment 1,000,000 The market's required return is 11% and the risk-free rate is 3%. What is the portfolio's required return? Round your answer to 3 decimal places. Do not round intermediate calculations.%
- 2-9 We have the following information on a portfolio consisting of Stocks A, B, and C: A B C Expectd annual return 25% 20% 15% Standard Deviation of Return 35% 30% 25% Price per share 100 85 75 # shares 100,000 150,000 200,000 correlation coefficient (A,B) 0.5 correlation coefficient (A,C) 0.2 correlation coefficient (B,C) .8 number of days per year 365 What…Mike Flannery holds the following portfolio: What is the portfolio's beta? Do not round your intermediate calculations.Stock Investment BetaA $150,000 1.40B $20,000 0.80C $130,000 1.00D $75,000 1.20Total $375,000 Question 6Select one: a. 1.02 b. 1.05 c. 1.28 d. 1.19 e. 1.43Stock A has an expected return of 13.52 percent. Stock B has an expected return of 9.24 percent. Assuming the Capital Asset Pricing Model holds, and Stock A's beta is greater than Stock B's beta by 0.32, what is the expected market risk premium (in percent)? Answer to two decimals