You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below. Stock   Investment   Beta A   $222,000     1.41 B   333,000     0.53 C   555,000     1.30 Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 12 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.) Beta of the portfolio   enter the beta rounded to 3 decimal places   Expected rate of return   enter percentages rounded to 2 decimal places %

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 25P
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You have just invested in a portfolio of three stocks. The amount of money that you invested in each stock and its beta are summarized below.

Stock   Investment   Beta
A
  $222,000     1.41
B
  333,000     0.53
C
  555,000     1.30


Calculate the beta of the portfolio and use the Capital Asset Pricing Model (CAPM) to compute the expected rate of return for the portfolio. Assume that the expected rate of return on the market is 12 percent and that the risk-free rate is 7 percent. (Round beta answer to 3 decimal places, e.g. 52.750 and expected rate of return answer to 2 decimal places, e.g. 52.75%.)

Beta of the portfolio
  enter the beta rounded to 3 decimal places  
Expected rate of return
  enter percentages rounded to 2 decimal places %
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