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- Ch 13] Julia has $5,000.00 to invest in a portfolio. She will build the portfolio from threeassets: Stock A with an expected return of 16.0% and a standard deviation of 42% Stock B with an expected return of 12.0% and a standard deviation of 32% T-Bills with an expected return of 4.00% and a standard deviation of 0%.Assume that she can short sell T-bills, the risk-free asset (or borrow at the risk-free rate).Assume also that she will invest the same amount in Stock A and Stock B. How muchmoney will she invest in Stock A if her goal is to create a portfolio with an expected returnof 20.00%.$(to nearest $0.01)QUESTION 10 An investor wishes to construct a portfolio by borrowing 35 percent of his original wealth and investing all the money in a stock index. The return on the risk-free asset is 4.0 percent, and the expected return on the stock index is 15 percent. Calculate the expected return on the portfolio. a. 9.50 percent b. 18.25 percent c. 11.15 percent d. 15.00 percent e. 18.85 percentSubject: Financial strategy & policy 8-2: PORTFOLIO BETA An individual has $35,000 invested in a stock with a beta of 0.8 and another $40,000 invested in a stock with a beta of 1.4. If these are the only two investments in her portfolio, what is her portfolio’s beta? 8-3: REQUIRED RATE OF RETURN Assume that the risk-free rate is 6% and the expected return on the market is 13%. What is the required rate of return on a stock with a beta of 0.7? 8-4: EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the expected return for the overall stock market? What is the required rate of return on a stock with a beta of 1.2?
- Question 6 Suppose that an investor has £1,000,000 to invest in a portfolio containing stocks A, B and a risk-free asset. The investor must invest all her money, and she is using the Capital Asset Pricing Model (CAPM) to make predictions of the expected return-beta relationship. Her objective is to create a portfolio that has an expected return of 14% and which has a beta of 0.75. If stock A has an expected return of 30% and a beta of 1.9, stock B has an expected return of 20% and a beta of 1.4, and the risk-free rate is 8%, how much money will she invest in stock A? Explain your answer and show your calculations.Question 7 The Amelia Knight investment fund has a total capital of R120 000 invested in three shares: SharesReturnInvestedTechnological Sector25%R60 000Education Sector13%R30 000Mining Sector20%R30 000 The current risk-free rate is 5,5%. Market returns have the following estimated probability distribution for the next period: ProbabilityMarket return0,3–10%0,1 14%0,2 15%0,4 18% What is the beta coefficient of the investment fund? 1. 0,52 2. 0,80 3. 1,82 4. 4,92Quantitative Problem: You are holding a portfolio with the following investments and betas: Stock Dollar investment Beta A $300,000 1.30 B 150,000 1.70 C 500,000 0.70 D 50,000 -0.20 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 5%. 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 1.3 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.%Problem 11-23 Analyzing a Portfolio You want to create a portfolio equally as risky as the market, and you have $2,400,000 to invest. Given this information, fill in the rest of the following table: (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Asset Investment Beta Stock A $360,000 1.00 Stock B $624,000 1.10 Stock C 1.20 Risk-free assetN2 10. There is a risky portfolio of multiple stocks with an expected return of 14% and a standard deviation of 21%. Jason invests 65% of his total wealth on this risky portfolio and the rest 35% on Treasury bills (so, he has constructed a ‘complete portfolio’ of a risky asset and a risk-free asset). One-year T-bill rate is 3%. a. Calculate the expected return and standard deviation of his complete portfolio b. Calculate his risk premium of the risky portfolio as well as of the complete portfolio c. Compute the Sharpe ratio d. Draw the capital allocation line