Suppose you have a portfolio that has $290 in stock A with a beta of 1.04, $1, 160 in stock B with a beta of 1.34, and $870 in the risk-free asset. You have another $580 to invest. You wish to achieve a beta for your whole portfolio to be the same as the market beta. What is the beta of the added security?

Suppose you have a portfolio that has $290 in stock A with a beta of 1.04, $1, 160 in stock B with a beta of 1.34, and $870 in the risk-free asset. You have another $580 to invest. You wish to achieve a beta for your whole portfolio to be the same as the market beta. What is the beta of the added security?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2Q: Security A has an expected rate of return of 6%, a standard deviation of returns of 30%, a...

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You have observed the following returns over time: Assume that the risk-free rate is 6% and the market risk premium is 5%. What are the betas of Stocks X and Y? What are the required rates of return on Stocks X and Y? What is the required rate of return on a portfolio consisting of 80% of Stock X and 20% of Stock Y?
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