You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings: LOADING... . a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest were 5 percent and the market risk premium were 6 percent, what rate of return would you expect to earn from each of the portfolios? Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.20 12% 38% B 0.95 12% 38% C 0.60 38% 12% D −1.80 38% 12%
You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings: LOADING... . a. What is the beta on each portfolio? b. Which portfolio is riskier? c. If the risk-free rate of interest were 5 percent and the market risk premium were 6 percent, what rate of return would you expect to earn from each of the portfolios? Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.20 12% 38% B 0.95 12% 38% C 0.60 38% 12% D −1.80 38% 12%
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 6P
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Question
(Portfolio beta and CAPM ) You are putting together a portfolio made up of four different stocks. However, you are considering two possible weightings:
LOADING...
.a. What is the beta on each portfolio?
b. Which portfolio is riskier?
c. If the risk-free rate of interest were
rate of return would you expect to earn from each of the portfolios?
5
percent and the market risk premium were
6
percent,
what
|
|
Portfolio Weightings
|
||
Asset
|
Beta
|
First Portfolio
|
Second Portfolio
|
|
---|---|---|---|---|
A
|
2.20
|
|
12%
|
38%
|
B
|
0.95
|
|
12%
|
38%
|
C
|
0.60
|
|
38%
|
12%
|
D
|
−1.80
|
|
38%
|
12%
|
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