Question
(15 points) The Treasury bill rate is 1.5% and the expected return on the market portfolio is 6.5%. The standard deviation of the return on
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(15 points) The Treasury bill rate is 1.5% and the expected return on the market portfolio is 6.5%. The standard deviation of the return on the market portfolio is 16%. Burlington Stores, Inc (BURL) has a beta of 0.27 and a volatility of 25%. Canada Goose Holdings, Inc (GOOS) has a beta of 3.1 and a volatility of 57%. The correlation between the returns on the two stocks is 0.23. Assume that both stocks are correctly priced according to the CAPM.
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(5 points) What portfolio P, combining the two stocks (BURL and GOOS), has an expected return of 25%? (You have to find the weight on BURL, , and the weight on GOOS, , such that the expected return on the portfolio is 25%.)
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(5 points) What is the standard deviation of the portfolio from part a?
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(5 points) What is the beta of the portfolio from part a?
(15 points) The Treasury bill rate is 1.5% and the expected return on the market portfolio is 6.5%. The standard deviation of the return on the market portfolio is 16%. Burlington Stores, Inc (BURL) has a beta of 0.27 and a volatility of 25%. Canada Goose Holdings, Inc (GOOS) has a beta of 3.1 and a volatility of 57%. The correlation between the returns on the two stocks is 0.23. Assume that both stocks are correctly priced according to the CAPM.
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(5 points) What portfolio P, combining the two stocks (BURL and GOOS), has an expected return of 25%? (You have to find the weight on BURL, , and the weight on GOOS, , such that the expected return on the portfolio is 25%.)
-
(5 points) What is the standard deviation of the portfolio from part a?
-
(5 points) What is the beta of the portfolio from part a?
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Macroeconomics Principles Applications And Tools
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez
7th Edition
978-0134089034, 9780134062754, 134089030, 134062752, 978-0132555234
