Homework Sourse2 The portfolio below has the following common stock Company
2) The portfolio below has the following common stock:
Company Expected Return Beta
East Corp $25,000 7.5% .5
West Corp $50,000 9.25% 2.0
North Corp $75,000 6.50% -.5
South Corp $100,000 8.0% 1.25
$250,000
The expected return of this portfolio is (Save the weights used for this problem as you will need them to calculate the beta in problem 3)
a.6.50%
b.6.75%
c. 7.50%
d. 7.75%
3)
Company Expected Return Beta
East Corp $25,000 7.5% .5
West Corp $50,000 9.25% 2.0
North Corp $75,000 6.50% -.5
South Corp $100,000 8.0% 1.25
$250,000
From problem 2, what is the portfolio s beta?
a. .70
b. .75
c. .80
d. .85
e. .90
| 2) The portfolio below has the following common stock: Company Expected Return Beta East Corp $25,000 7.5% .5 West Corp $50,000 9.25% 2.0 North Corp $75,000 6.50% -.5 South Corp $100,000 8.0% 1.25 $250,000 The expected return of this portfolio is (Save the weights used for this problem as you will need them to calculate the beta in problem 3) | ||||||||||||
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Solution
1)
Weight of East corp = 25,000 / 250,000 = 0.1
Weight of west corp = 50,000 / 250,000 = 0.2
Weight of north cop = 75,000 / 250,000 = 0.3
Weight of south cop = 100,000 / 250,000 = 0.4
Expected return = 0.1 * 0.075 + 0.2 * 0.09254 + 0.3 * 0.065 + 0.4 * 0.08
Expected return = 0.0075 + 0.0185 + 0.0195 + 0.032
Expected return = 0.0775 or 7.75%
Question 2 is same as question 1
