Question
An investor has $10,000 to invest in 5 different stocks. Information regarding the 5 stocks is shown in the table below: Stock Expected Return Beta
An investor has $10,000 to invest in 5 different stocks. Information regarding the 5 stocks is shown in the table below:
| Stock | Expected Return | Beta | Amount Invested |
|---|---|---|---|
| A | 9.00% | 1.00 | $1,609.00 |
| B | 10.00% | 1.20 | $2,772.00 |
| C | 6.50% | 0.70 | $2,839.00 |
| D | 8.00% | 0.90 | $952.00 |
| E | 12.00% | 1.40 | $1,828.00 |
Also, the risk free rate for the economy is currently 2.00%.
Given the above information, what is the market risk premium for investors (assuming the expected portfolio return is equal to the required portfolio return)?
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Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924))
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Public Finance
Authors: Harvey S. Rosen
5th Edition
025617329X, 978-0256173291
