Jane invests 40% of her money in Stock A and 60% in Stock B. Stock A has a beta of 1.2 and Stock B has a beta of 1.6. If the risk-free rate is 5% and the expected return on the market is 12%, what’s the Jane’s expected return for her portfolio?

Jane invests 40% of her money in Stock A and 60% in Stock B. Stock A has a beta of 1.2 and Stock B has a beta of 1.6. If the risk-free rate is 5% and the expected return on the market is 12%, what’s the Jane’s expected return for her portfolio?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 15MC

See similar textbooks

Related questions

Q: A. An individual has $115,000 invested in a stock with a beta of 2.15, $30,000 invested in a stock…

A: In the given question we require to compute the beta of the portfolio. Portfolio beta is the…

Q: Michael holds a portfolio that has an expected return of 11.0%, a total value of $90,000, and a beta…

A: To determine the portfolio beta we need to multiply the percentage of the portfolio of each…

Q: Joseph is going to purchase two stocks to form the initial holdings in his portfolio. Iron stock has…

A: The portfolio refers to the combination of different securities. The securities can be stock, bonds,…

Q: Christy is considering investing in the common stock of One Liberty and Heico. The following data…

A: Given information: One liberty (OL) Heico (H) Weights (W) 70% 30% Expected return (Er) 0.12…

Q: Sharmila holds a stock with an expected return of 15 percent. The risk-free rate is 5 percent. What…

A: Following details are given in the question: Expected return of Stock = 15% Risk free rate (Rf) = 5%…

Q: An individual has $30,000 invested in a stock with a beta of 0.6 and another $50,000 invested in a…

A: Introduction: The term portfolio beta refers to a metric which is used in calculating the overall…

Q: Your portfolio consists of 100 shares of CSH and 50 shares of EJH, which you just bought at $20 and…

A: The fraction of investment can be calculated by using this equation Fraction =Individual…

Q: 8

A: Expected return and weight: Fremont Enterprise = 15% and 30% weight Laurel Hurst = 20% and 70%…

Q: An individual has $36000 invested in Stock A with a beta of 1.1 and another $35000 invested in Stock…

A: Stock A investment = 36000 Stock B investment =35000 Stock A beta =1.1 Stock B beta =1.4 Total…

Q: An individual has $20,000 invested in a stock with a beta of 0.6 and another $75,000 invested in a…

A: Investment in stock 1 = $20,000 Investment in stock 2 = $75,000 Total investment in both stocks =…

Q: Kelly has investments with the following characteristics in her portfolio: Investment in Beta Amount…

A: Formulas Expected return = Risk free rate + (Beta *(market rate - risk free rate))

Q: To create a delta-neutral portfolio, the SIT fund has sold 10,000 put options on Epsilon stock with…

A: Black Scholes Model is one of the model which is based on mathematical derivation so that prices of…

Q: Mr. Scared, a portfolio manager has a P10 million portfolio, which consist of P1 million invested in…

Q: Shamila holds a stock with an expected return of 15 percent. The risk-free rate is 5 percent. What…

A: In the given question we require to compute the risk premium shamila earn by holding the stock. We…

Q: Your portfolio consists of 125 shares of CSH and 60 shares of EJH, which you just bought at $20 and…

A: CSH share= 125 shares @$20 each EJH share= 60 shares @31 per share Initial portfolio weights CSH…

Q: You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a…

A: Let W be the amount invested in stock X and (1-W) is the amount invested in stock Y.…

Q: Penny Francis inherited a $200,000 portfolio of investments from her grandparents when she turned…

A: Stock market includes investors dealing with the risk and return on the daily basis. Investing into…

Q: A person has $25,000 invested in a stock with a beta of 0.6 and another $75,000 invested in a stock…

A: Portfolio beta is a measure of the overall systematic risk of a portfolio of investments. It equals…

Q: expected return of 20% and a beta of 1.4, and the risk-free rate is 8%, how much money will she…

A: Portfolio Return: It is computed by the sum of individual returns of the portfolio security that…

Q: An individual has $35,000 invested in a stock which has a beta of 0.8 and $40,000 invested in a…

A: In this question we need to calculate the beta of the portfolio. Beta of the Portfolio is Weighted…

Q: Elsi is a risk-averse investor. She has invested 60% of her investment in share A and all the…

A: Weight of A = 60% Weight of B = 100% - 60% = 40% Expected return on A = 10% Expected return on B =…

Q: You have $20,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of…

A: A portfolio is the collection of different stocks to diversify the overall risk of the investment.

Q: What is the expected return of your portfolio if Jacob, Bella, and Edward have expected returns of…

A: Information Provided: Jacob investment = 30% Bella investment = 40% Edward investment = 30% Jacob…

Q: Ff you invest 30% of your funds in AT&T stock with an expected rate of return of 10% and the…

Q: You have $24,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of…

A: Given that the total investment amount is $24,000, expected return on stock X is 13% and expected…

Q: Jenefir decided to form a portfolio by investing 40% of her funds in the market portfolio, 30% in an…

A: Beta of market is 1 Beta of tbill = 0

Q: She has $71,000 invested in stock A with a beta of 1.30 and another $56,000 invested in stock B with…

A: Portfolio beta is calculated using weighted Average beta Weight of the stock x Beta

Q: Wanda is thinking of buying stock X at the beginning of the year. By the end of the year, the market…

A: In the question, we have to calculate value of stock at the beginning of the year. Dividend discount…

Q: An investor put 40% of her money in Stock A and 60% in Stock B. Stock A has a beta of 1.2 and Stock…

A: Weight of Stock A = 40% Weight of Stock B = 60% Beta of Stock A = 1.2 Beta of Stock B = 1.6 Risk…

Q: An investor is forming a portfolio by investing $50,000 in stock A which has a beta of 2.40, and…

A: Portfolio beta can be calculated by multiplying the the individual beta with its weight in…

Q: What is the portfolio’s expected return?

A: Portfolio expected return is the return that is expected to generate from a portfolio. Generally…

Q: percent of stock X, 20 percent of stock Y, and the rest in stock Z. Stock X has an expected return…

A: Return on portfolio is weighted average return of all stocks in portfolio.

Q: Ms Pau Cam has a Php40-million portfolio with a beta of 1.20. The risk- free rate is 5%, and the…

A: Capital Asset Pricing Model (CAPM) is sued to determine the required return on the portfolio. Here,…

Q: An investor has $5,000 invested in a stock which has an estimated beta of 1.2, and another $15,000…

A: Required return of portfolio = risk free rate + (beta of portfolio * market risk premium) 15% = 6% +…

Q: Rachel is a financial investor who actively buys and sells in the securities market. Now she has…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: You have $100,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: You have $260,000 to invest in a stock portfolio. Your choices are Stock H, with an expected return…

A: The expected return of a portfolio helps the investor to determine the performance of the portfolio.

Q: Alecia is a financial investor who actively buys and sells in the securities market. Now she has a…

A: a) Working note:

Q: An investor is forming a portfolio by investing $50,000 in stock A which has a beta of 2.40, and…

A: Question 1 Given in the question the following information, Investment in Stock A and B = $50,000…

Q: Your portfolio consists of 100 shares of CSH and 50 shares of EJH, which you just bought at $20 and…

A: Given that: The portfolio consists of 100 shares of CSH and 50 shares of EHJ Purchase price $20and…

Q: An investor wishes to add new stocks to her portfolio. She has information about two assets, Stock A…

A: For deciding which stock to purchase we need to calculate the required rate of return on each…

Q: Suppose you invest $10,000 in Ford stock, and $30,000 in Tyco International Stock. You expect a…

A: Investment in Ford stock=$10000 Investment in Tyco international stock= $30000 expected return from…

Q: An individual has $3500 invested in a stock that has a beta of 0.8 and $4000 invested in a stock…

A: Total amount invested = sum of amount invested in specific stock Total amount invested =$3,500 +…

Question

Jane invests 40% of her money in Stock A and 60% in Stock B. Stock A has a beta of 1.2 and Stock B
has a beta of 1.6. If the risk-free rate is 5% and the expected return on the market is 12%, what’s the
Jane’s expected return for her portfolio?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Jamie has wealth of $10,000 to invest. The market portfolio consists of three stocks with 20% being Stock A, 40% being Stock B and the remainder Stock C. The expected return on this market portfolio is 14%. The risk free rate is 5%. The CAPM holds. Suppose Jamie's optimal portfolio has an expected return of 23%, what are the dollar values of her investments in A, B. C and the risk free asset?
) An investor has $5,000 invested in a stock which has an estimated beta of 1.2, and another $15,000 invested in the stock of the company for which she works. The risk-free rate is 6 percent and the market risk premium is also 6 percent. The investor calculates that the required rate of return on her total ($20,000) portfolio is 15 percent. What is the beta of the stock of the company for which she works?
She has $71,000 invested in stock A with a beta of 1.30 and another $56,000 invested in stock B with a beta of .60. If these are the only two investments in her portfolio, what is her portfolio’s beta?
Michael holds a portfolio that has an expected return of 11.0%, a total value of $90,000, and a beta of 1.20. He is in the process of buying $10,000 worth of TTR stock and adding it to his portfolio. TTR has an expected return of 13.0% and a beta of 1.50. What will the beta of the portfolio be after the purchase of the TTR stock?
Janet has a portfolio of 8 securities, each with a market value of $5,000. The current beta of the portfolio is 1.28, and the beta of the riskiest security is 1.75. She wishes to reduce her portfolio beta to 1.15 by selling the riskiest security and replacing it with another security with a lower beta. What must be the beta of the replacement security?
Tasman Co. has a beta of 0.9, and an expected return of 15%. Macquarie Co. has a beta of 1.2 and an expected return of 16%. Lucy plans to invest in both stocks. If risk-free rate is 2.5%, and Lucy are spreading her money equally on both stocks, what is the expected return on Lucy’s portfolio? If a portfolio of the two assets has a beta of 0.95, what are the portfolio weights? If Lucy includes one more risk-free asset into her existing portfolio in part (b), and this new portfolio has a beta of 1.3. what are the portfolio weights? How do we interpret the weight for the risk-free asset?
An individual has $36000 invested in Stock A with a beta of 1.1 and another $35000 invested in Stock B with a beta of 1.4. If these are the only two investments in her portfolio, what is her portfolio's beta?
Ms. B has $1000 to invest. She is considering investing in the common stock of company M. In addition, Ms. B will either borrow or lend at the risk-free rate. Ms. B decide to invest $350 in common stock of company M and $650 placed in the risk- free asset. The relevant parameters are 1) What is the expected return? 2) What is the variance of the portfolio? 3) What is the standard deviation of the portfolio?
Christy is considering investing in the common stock of One Liberty and Heico. The following data are available for these two securities: One Liberty Heico Expected return 0.12 0.16 Standard deviation of returns 0.08 0.20 If she invests 30% of her funds in Heico and 70% in One Liberty, and if the correlation of returns between these securities is +0.65, what is the portfolio's expected return and standard deviation?
Ms Pau Cam has a Php40-million portfolio with a beta of 1.20. The risk- free rate is 5%, and the market risk premium is 6%. Ms. Pau expects to receive an additional Php40 million which she plans to invest in the stock market. After investing the additional funds, she wants the fund’s required and expected return to be 15%. What must be the average beta of the new stock to reach the target required rate of return?
Your client decides to invest $60 million in Flama and $40 million in Blanca stocks. The risk-free rate is 2% and the market risk premium is 4%. The beta of the Flama Stock is 2, and the beta of the Blanca stock is 4. What are the weights for this portfolio? What is the portfolio beta? What is the required return of the portfolio?
Rebecca invested $9,000 in a stock that has an expected return equal to 18 percent and $21,000 in a stock with an 8 percent expected return. What is the portfolio’s expected return?