Question
A portfolio composed of the stocks below earned a return of 12.00% last year, while the S&P 500 earned 9.00%. The portfolio manager has asked
A portfolio composed of the stocks below earned a return of 12.00% last year, while the S&P 500 earned 9.00%. The portfolio manager has asked you for a performance bonus as he beat the S&P 500. The risk free rate was 4.00% last year, while the market portfolio risk premium was 6.00%. Lets evaluate his claim.
PORTFOLIO:
| STOCK | BETA | DOLLARS INVESTED |
|---|---|---|
| Volunteer (VOL) | 1.50 | $2,000.00 |
| Bulldog (DOG) | 1.40 | $2,000.00 |
| Commodore (DORE) | 2.00 | $4,000.00 |
What was the required return for his portfolio last year based on the risk?
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Business Analysis And Valuation Using Financial Statements
Authors: Krishna G Palepu, Paul M Healy
4th Edition
032430286X, 9780324302868
