The firm wishes to estimate the beta of a portfolio that consists of two assets X and Y. The investment manager of the firm has gathered the following information on the two assets. Securities Rate of Return Standard Deviation Beta X 20% 20% 1.5 Y 10% 30% 1.0 Risk free asset 5% Calculate: The beta of the portfolio if 75% of the funds are invested in Y and 25% in X The portfolio expected return and the portfolio beta if you invest 35 % in X, 45% in Y and 20 % in the risk-free asset Assuming the CAPM applies, if the market’s expected return is 13 percent, the risk free rate is 8% and stock X’s required rate of return is 16%, what is the stock’s beta coefficient?
The firm wishes to estimate the beta of a portfolio that consists of two assets X and Y. The investment manager of the firm has gathered the following information on the two assets. Securities Rate of Return Standard Deviation Beta X 20% 20% 1.5 Y 10% 30% 1.0 Risk free asset 5% Calculate: The beta of the portfolio if 75% of the funds are invested in Y and 25% in X The portfolio expected return and the portfolio beta if you invest 35 % in X, 45% in Y and 20 % in the risk-free asset Assuming the CAPM applies, if the market’s expected return is 13 percent, the risk free rate is 8% and stock X’s required rate of return is 16%, what is the stock’s beta coefficient?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 5P
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Question
The firm wishes to estimate the beta of a portfolio that consists of two assets X and Y.
The investment manager of the firm has gathered the following information on the two
assets.
Securities
Standard
Deviation
Beta
X
20%
20%
1.5
Y
10%
30%
1.0
Risk free asset
5%
Calculate:
- The beta of the portfolio if 75% of the funds are invested in Y and 25% in X
- The portfolio expected return and the portfolio beta if you invest 35 % in X, 45% in Y
and 20 % in the risk-free asset
- Assuming the
CAPM applies, if the market’s expected return is 13 percent, the risk
free rate is 8% and stock X’s required rate of return is 16%, what is the stock’s beta
coefficient?
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