Question
a. Based on the following beta estimates, what would be the portfolio beta for a portfolio invested as follows? Portfolio Weights Beta Old National Bank
a. Based on the following beta estimates, what would be the portfolio beta for a portfolio invested as follows?
Portfolio Weights Beta
Old National Bank 20% 0.8
Chesapeake Energy 15% 0.6
Pentair 15% 0.8
Pegasus 20% 0.5
Cisco 30% 1.8 100%
b. Based on the Beta estimates in part a, a Treasury bond rate of 3.50% and an expected market risk premium of 8%, what would be the expected return on the portfolio described in part a (assuming the stocks are fairly priced based on the CAPM)?
c. You have invested $75,000 in this portfolio. In an effort to lower the risk of your portfolio, you have decided to shift $25,000 into Treasury bonds. What would be the new beta of the $75,000 portfolio?
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Fundamental accounting principle
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
21st edition
1259119831, 9781259311703, 978-1259119835, 1259311708, 978-0078025587
