FREE Trial
Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A portfolio is created with an expected return of 12% by investing in a risk-free security and one share. If the risk-free return is 2%

A portfolio is created with an expected return of 12% by investing in a risk-free security and one share. If the risk-free return is 2% and the share's expected return is 15%, what should be the portfolio weighting invested in the risk-free security?

Step by Step Solution

★★★★★

3.40 Rating (163 Votes )

There are 3 Steps involved in it

Step: 1

We can use the Capital Asset Pricing Model CAPM to calculate the ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Corporate Finance

Fundamentals Of Corporate Finance

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts, J. Ari Pandes, Thomas Holloway

10th Canadian Edition

1259654753, 9781259654756

More Books

Students also viewed these Finance questions

Question

★★★★★
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...

Answered: 1 week ago

Question

★★★★★
1. Security A has expected return of 17.6% and beta of 1.4. If the risk-free rate is 6%, what is the reward-to-risk rate for Security A? Question 2 The common stock of Detroit Engines has a beta of...

Answered: 1 week ago

Question

★★★★★
Your portfolio consists of 250 shares of Stock K with a current market price of $40 per share, 150 shares of Stock Q with a current market price of $25 per share and $8,000 invested in the risk-free...

Answered: 1 week ago

Question

★★★★★
We consider the following CFG SE + SIE E 01|2|3|4|5|67|8|9|(S) Apply the leftmost derivation and rightmost derivation with a top-down parser for this sentence: (3+7+ (1+4)) + 2

Answered: 1 week ago

Question

★★★★★
Given all the estimating done to determine the duration of project activities, what does it mean to say that only after the fact do we know which path was actually the critical path?

Answered: 1 week ago

Question

★★★★★
Provide three style sheet rules with selectors named message1, message2, and message3 that use red, green, and blue to display an opaque dark magenta background color. For the three rules, use...

Answered: 1 week ago

Question

★★★★★
Using the Birth Weight data set, test the null hypothesis that the mean weight of a baby born to (a) mothers who did not smoke during pregnancy is less than 3200 g. Be sure to check the assumption of...

Answered: 1 week ago

Question

★★★★★
How sensitive is the value of IWPI-Spain to the assumed discount rate of 11.1%? What happens to the value of the project if the rate is 12.1% instead?

Answered: 1 week ago

Question

★★★★★
Data for Hermann Corporation are shown below: Fixed expenses are $82,000 per month and the company is selling 3,500 units per month. equired: a. How much will net operating income increase (decrease)...

Answered: 1 week ago

Question

★★★★★
The following table gives data on new passenger cars sold in the United States as a function of several variables. a. Develop a suitable linear or loglinear model to estimate a demand function for...

Answered: 1 week ago

Question

★★★★★
Question 5 A bank is a lender in the floating-rate instrument market. It uses fixed-rate financing on its floating-rate loan and buys floors to hedge the rate. It makes a R20 million one-year loan on...

Answered: 1 week ago

Question

★★★★★
ANSWER & EXPLAIN the questions: How does company analysis help in making a strategic plan? Why is it important to be familiarize with the format of a strategic plan?

Answered: 1 week ago

Question

★★★★★
You must now complete an analysis of the mobile phone market. Who are the key players? Create a list of companies in priority order based on sales. What are the key strengths and unique selling...

Answered: 1 week ago

Question

★★★★★
1) BobTheCat Enterprises has asked FoxFirst Consulting to help with upgrading 600 desktop users from Windows 7 to Windows 10. As per contract, FoxFirst will provide the upgrade strategy. Discuss...

Answered: 1 week ago

Question

★★★★★
Harvey's Restaurants In your own words, explain the Harvey's brand, Canadian values, and range of products/services. A minimum of four sentences is required here. Strengths Explain three (3)...

Answered: 1 week ago

Question

★★★★★
Find the initial basic feasible solution for the TP by VAM. D D2 D3 Dy Supply Dz 0, 11 13 17 14 250 02 16 16 18 14 10 300 03 21 24 13 10 400 Dem 200 225 275 250 950

Answered: 1 week ago

Question

★★★★★
Problem 2 (See pages 296 307) You are called in as a financial analyst to appraise the bonds of Merck & Company, Inc. The $1,000 par value bonds have a quoted annual interest rate of 5.4%, which is...

Answered: 1 week ago

Question

★★★★★
You are thinking of investing in one of two companies. In one annual report, the auditors opinion states that the financial statements were prepared in accordance with generally accepted accounting...

Answered: 1 week ago

Question

★★★★★
Wolseley PLC has a net loss of 45,831 on sales of 198,352 (both in thousands of pounds). Does the fact that these figures are quoted in a foreign currency make any difference? Why? What was the...

Answered: 1 week ago

Question

★★★★★
The Charella Coffee Company has projected the following quarterly sales amounts for the coming year: a. Accounts receivable at the beginning of the year are $345. Charella has a 45-day collection...

Answered: 1 week ago

Question

★★★★★
Kanata Construction specializes in large projects in Edmonton and Saskatoon. In 2017, Kanata invested $1.5 million in new excavating equipment, which qualifies for a CCA rate of 50%. At the same time...

Answered: 1 week ago

Question

★★★★★
2.6 Describe the key features of cognitive models of abnormal behavior and evaluate their major contributions.

Answered: 1 week ago

Question

★★★★★
2.18 Evaluate biomedical treatment approaches.

Answered: 1 week ago

Question

★★★★★
T F We one day may be able to silence certain genes or activate others to treat or even prevent psychological disorders. (p. 49)

Answered: 1 week ago

Previous Question Next Question