Question
46. (3 points) An investor has constructed a portfolio with the following investments: ASSET: DOLLARS INVESTED: BETA: Apple $15,000 1.40 Kelloggs $5,000 0.20 S&P 500
46. (3 points) An investor has constructed a portfolio with the following investments:
| ASSET: | DOLLARS INVESTED: | BETA: |
| Apple | $15,000 | 1.40 |
| Kelloggs | $5,000 | 0.20 |
| S&P 500 Index | $20,000 | 1.00 |
The investor has a target return of 9% on the portfolio (using CAPM). The current risk free rate in the economy is 4%, while the market portfolio risk premium is 6.00%.
The investor will invest dollars in a Treasury bill to adjust the risk in the portfolio to hit the beta needed for the 9% return. How much money should the investor put in Treasury bills to meet her goals? (assume that the dollars invested in the rest of the portfolio do not change)
| a. | $10,400 |
| b. | $12,200 |
| c. | $16,400 |
| d. | $23,000 |
| e. | $25,250 |
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Finance And Sustainability Proceedings From The Finance And Sustainability Conference Wroclaw 2017
Authors: Agnieszka Bem, Karolina Daszy?ska-?ygad?o , Ta?ána Hajdíková, Péter Juhász
1st Edition
3319922270,3319922289
