ou own $14,504 of Opsware, Inc. stock that has a beta of 3.85. You also own $20,384 of Lowe’s Companies (beta = 1.89) and $4,312 of New York Times (beta = 1.17). Assume that the market return will be 16 percent and the risk-free rate is 7 percent.What is the market risk premium?  ___%What is the risk premium of each stock? (Round your answers to 2 decimal places.)Opsware’s risk premium_____.__%Lowe’s risk premium_____.__%New York Time's risk premium_____.__% What is the risk premium of the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)Portfolio Risk Premium: ___.__%

Question
Asked Nov 4, 2019

ou own $14,504 of Opsware, Inc. stock that has a beta of 3.85. You also own $20,384 of Lowe’s Companies (beta = 1.89) and $4,312 of New York Times (beta = 1.17). Assume that the market return will be 16 percent and the risk-free rate is 7 percent.

What is the market risk premium?  ___%

What is the risk premium of each stock? (Round your answers to 2 decimal places.)

Opsware’s risk premium _____.__ %
Lowe’s risk premium _____.__ %
New York Time's risk premium _____.__ %

 

What is the risk premium of the portfolio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Portfolio Risk Premium: ___.__%

check_circleExpert Solution
Step 1

Calculation of Market Risk Premium, Risk Premium for each stock and Portfolio Risk Premium:

The market risk premium is 9%, risk premium for Opsware is 34.65%, Lowe\'s is 17.01% and New York Time\'s is 10.53% and portfolio risk premium is 22....

А
В
1 Market Return
16%
2 Riskfree Rate
3 Beta of Opsware
4 Beta of Lowe's
5 Beta of New York Time's
6 Investment of Opsware
7 Investment of Lowe's
8 Investment of New York Time's
9 Weight of Opsware
10 Weight of Lowe's
11 Weight of New York Time's
7%
3.85
1.89
1.17
$14,504
$20,384
$4,312
37.00%
52.00%
11.00%
Market Risk Premium
12
9%
Risk Premium of Opsware
Risk Premium of Lowe's
15 Risk Premium of New York Time's 10.53%
13
34.65%
14
17.01%
16
Portfolio Risk Premium
22.82%
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А В 1 Market Return 16% 2 Riskfree Rate 3 Beta of Opsware 4 Beta of Lowe's 5 Beta of New York Time's 6 Investment of Opsware 7 Investment of Lowe's 8 Investment of New York Time's 9 Weight of Opsware 10 Weight of Lowe's 11 Weight of New York Time's 7% 3.85 1.89 1.17 $14,504 $20,384 $4,312 37.00% 52.00% 11.00% Market Risk Premium 12 9% Risk Premium of Opsware Risk Premium of Lowe's 15 Risk Premium of New York Time's 10.53% 13 34.65% 14 17.01% 16 Portfolio Risk Premium 22.82%

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