a)
To discuss:
Calculation of beta.
Introduction:
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
b)
To discuss:
Calculation of beta.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
c)
To discuss:
Calculation of beta.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
d)
To discuss:
Calculation of beta.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
e)
To discuss:
Maximum expected return for risk averse.
Introduction:
Capital asset pricing model or CAPM establishes the relationship between the projected return for assets and systematic risk on the stocks.
Beta is an indicator of the risk tha measures the systematic risk of a risky investment by comparing the risky investment with the average risky asset in the market.
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Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
- Suppose you have the following investments: Security Amount Invested Expected Return Beta A $2,000 5% .80 B $4,000 10% .95 C $6,000 15% 1.10 D $8,000 18% 1.40 What is the beta of the portfolio? Select one: a. 1.16 b. 0.59 c. 1.34 d. 1.20arrow_forwardQuestion 5 You have a portfolio with the following Social Risk Scores for each of your investments. Given the weights in each investment, what is the Social Risk Score for your portfolio? If the weights don't sum to one then the remainder is in cash with no Social risk. (Answer to one decimal place, 6.1) Weight (in %) Soc Risk Score Question 6 Weight (in %) Tesla Gov Risk Score 14 2 Tesla 8 Ford 4 5 11 Ford 7 Chevron 12 5 20 Chevron You have a portfolio with the following Governance Risk Scores for each of your investments. Given the weights in each investment, what is the Governance Risk Score for your portfolio? If the weights don't sum to one then the remainder is in cash with no environmental risk. (Answer to one decimal place, 6.1) 6 Home Depot 17 14 Home Depot 12 JP Morgan 4 13 2 JP Morgan 14 Starbucks Microsoft 4 7 7 11 11 4 Starbucks Microsoft 9 5 5arrow_forwardq4- The expected return on the market is 11% and the standard deviation of returns on the market is 4.8%. The risk-free rate of return is 5%. If you invest 75% of your funds in the market portfolio, and the balance in the risk-free asset, what is the expected return from your investment? a. 5.95% b. 10.21% c. 6.50% d. 9.50%arrow_forward
- Question four Wipro provides you the following information's. Calculate the expected rate of return of an asset Expected market return 15% Risk-free rate of return 9% Standard deviation of an asset 2.4% Market Standard deviation 2.0% Correlation co-efficient of portfolio with market 0.9 Question five Share of ABE Ple has a beta of 1.5, the risk free rate of retum is 5% and the market expected return is 9%. You want invest ABE Plc shares and the expected return from share is 11%. Is the share overpriced according to CAPM?arrow_forwardSuppose you have the following investments: Security Amount Invested Expected Return Beta A $2,000 5% .80 B $4,000 10% .95 C $6,000 15% 1.10 D $8,000 18% 1.40 What is the expected return on this portfolio? Select one: a. 15.2% b. 16.4% c. 14.2% d. 14.9%arrow_forwardQUESTION 15 If you invest $45,000 in the market index and $30,000 in a risk free investment what is the beta risk of your investment? O 0.30 O 0.40 O 0.45 0.60arrow_forward
- Quantitative Problem: You are holding a portfolio with the following investments and betas: Dollar investment Beta 1.35 1.50 0.85 -0.20 Stock A B с $200,000 100,000 500,000 200,000 Total investment $1,000,000 The market's required return is 11% and the risk-free rate is 4%. What is the portfolio's required return? Do not round intermediate calculations. Round your answer to three decimal places. %arrow_forwarda. Calculate both the arithmetic and the geometric average return of the following investment;Year 1 2 3 4Return 10.5% 12.2% -5.5% 2.8%(4 marks)b. Teena is considering investing in Stock A and stock B. She plans to invest $ 25,000 in the low riskstock and $ 50,000 in the high-risk stock. You have been given the following information about thesetwo stocks in the table below:Stock A BE(R) 15% 10? 25% 22%Correlation between A and B 0.20Based on the given information above, you are required to:i. Calculate the portfolio weightsii. Calculate the portfolio return.iii. Calculate the portfolio risk.iv. Compare portfolio risk with the individual stock risks and identify the benefit of thediversification of the portfolio.arrow_forwardQuantitative Problem: You are holding a portfolio with the following investments and betas: Stock A B C D Dollar investment % $200,000 200,000 300,000 300,000 Beta 1.25 1.50 0.80 -0.25 Total investment $1,000,000 The market's required return is 9% 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.arrow_forward
- Question content area top Part 1 (Capital asset pricing model) Anita, Inc. is considering the following investments. The current rate on Treasury bills is 7 percent, and the expected return for the market is 12.5 percent. Using the CAPM, what rates of return should Anita require for each individual security? Stock Beta H 0.71 T 1.62 P 0.89 W 1.37 (Click on the icon in order to copy its contents into a spreadsheet.) Question content area bottom Part 1 a. The expected rate of return for security H, which has a beta of 0.71, is enter your response here%. (Round to two decimal places.) Part 2 b. The expected rate of return for security T, which has a beta of 1.62, is enter your response here%. (Round to two decimal places.) Part 3 c. The expected rate of return for security P, which has a beta of 0.89, is enter your response here%. (Round to two decimal places.) Part 4 d. The expected rate of return for…arrow_forwardSuppose you are an investor with a choice between three securities that are identical in every way except in terms of their rates of return and risk. Which investment provides the highest expected return? Investment A: total return= 10% with profitability 50% total return= 20% with profitability 50% Investment B: total return= 12% with profitability 50% total return= 18% with profitability 50% Investment A: total return= 5% with profitability 60%arrow_forwardQuantitative 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.%arrow_forward
- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT