Question
Expected return of a portfolio using beta Part A : The beta of four stocksG, H, I, and Jare 0.44, 0.81, 1.06, and 1.54, respectively
Expected return of a portfolio using beta
Part A :
The beta of four stocksG, H, I, and Jare 0.44, 0.81, 1.06, and 1.54, respectively and the beta of portfolio 1 is 0.96, the beta of portfolio 2 is 0.82, and the beta of portfolio 3 is 1.09. What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 3.5% (risk-free rate) and a market premium of 11.0% (slope of theline)?
Part B :
The beta of four stocksP, Q, R, and Sare 0.42, 0.81, 1.09, and 1.52, respectively and the beta of portfolio 1 is 0.96, the beta of portfolio 2 is 0.82, and the beta of portfolio 3 is 1.10. What are the expected returns of each of the four individual assets and the three portfolios if the current SML is plotted with an intercept of 3.5% (risk-free rate) and a market premium of 12.0% (slope of theline)?
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