Question
15. A $16,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 0.73 while the beta of stock
15. A $16,000 portfolio is invested in a risk-free security and two stocks. The beta of stock A is 0.73 while the beta of stock B is 1.99. One-half of the portfolio is invested in the risk-free security. How much is invested in stock A if the beta of the portfolio is 0.67?
Part B Aine would like to create a portfolio that is equally invested in a risk-free asset and two stocks. The one stock has a beta of 1.14. What does the beta of the second stock have to be if Aine wants the portfolio risk to equal that of the overall market?
Part C The common stock of Modron Creations has an expected return of 13.89 percent and a beta of 1.41. The expected return on the market is 10.77 percent. What is the risk-free rate (in percents)?
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