Complete Problem 10 from the Questions and Problems section of Chapter 12: A stock has a beta of .9

Aug 3rd, 2016
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Complete Problem 10 from the Questions and Problems section of Chapter 12: A stock has a beta of .9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent. a. What is the expected return on a portfolio that is equally invested in the two assets? b. If a portfolio of the two assets has a beta of .5, what are the portfolio weights? c. If a portfolio of the two assets has an expected return of 8 percent, what is its beta? d. If a portfolio of the two assets has a beta of 1.80, what are the portfolio weights? How do you interpret the weights for the two assets in this case? Explain. Remember to complete all parts of the questions, and report the results of your analysis.

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5Complete Problem 10 from the Questions and Problems section of Chapter 12: A stock has abeta of .9 and an expected return of 9 percent. A risk-free asset currently earns 4 percent.a. What is the expected return on a portfolio that is equally invested in the two assets?b. If a portfolio of the two assets has a beta of .5, what are the portfolio weights?c. If a portfolio of the two assets has an expected return of 8 percent, what is its beta?d. If a portfolio of the two assets has a beta of 1.80, what are the portfolio weights? How do youinterpret the weights for the two assets in this case? Explain.Remember to complete all parts of the questions, and report the results of your analysis..(a) Here,WA = 50% and WF =50%RA = 9% and RF =4%Portfolio Return, RP = (RA * WA) + (RF * WF)= (0.09*0.50) + (0.04*0.50)= 0.

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