i Data Table - X Stock Beta Expected Return 1 2 3 4 5 Percentage of Portfolio 20% 30% 15% 25% 10% 1.00 0.85 1.20 0.60 1.60 16% 14% 20% 12% 24% Print Done (Estimating betas) Consider the following stock returns for B&A Trucking, Inc. and the market index: Holding-period returns (%) 12 8- . O 4 (-Axis) B&A's beta is estimated to be about (Select the best choice below.) O A. +2.0 OB. +1.0 OC. +0.5 D. -0.5 O E. -1.0 OF. - 2.0 Holding-period returns (%) 12 10- 8- ch 4 . 2- B&A Trucking (Y-Axis) 1 -14 -12 -10 -8 -6 -4 2 4 6 00- 10 12 14 2- 4 -6- -8- -10 -12- S&P 500 Index (X-Axis) (Portfolio beta and security market line) You own a portfolio consisting of the following stocks: :: The risk-free rate is 8 percent. Also, the expected return on the market portfolio is 14 percent. a. Calculate the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of the individual stock's expected return, where the weights are the percentage invested in each stock.) b. Calculate the portfolio beta. c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in part c, which stocks appear to be your winners and which ones appear to be losers? e. Why should you consider your conclusions in part d to be less than certain? a. The expected return of your portfolio is 16.05 %. (Round to two decimal places.) b. The beta of your portfolio is 0.97. (Round to two decimal places.) c. Assume the risk-free rate is 8 percent and the expected return on the market portfolio is 14 percent. Given that the stocks from your portfolio have been plotted on the graph below, draw the security market line on the graph. Note that you can click the magnifying glass button to enlarge the graph and use the Line Drawing Tool in the palette to draw the line Security Market Line 307 28- 5 26- 24 22- 3 20- 18- 1 16- Expected return (%) 14- ON ? 12- 10- 4 8- 6- 4- LN 0 0.5 1.5 2 1 Beta i Data Table - X Stock Beta Expected Return 1 2 3 4 5 Percentage of Portfolio 20% 30% 15% 25% 10% 1.00 0.85 1.20 0.60 1.60 16% 14% 20% 12% 24% Print Done (Estimating betas) Consider the following stock returns for B&A Trucking, Inc. and the market index: Holding-period returns (%) 12 8- . O 4 (-Axis) B&A's beta is estimated to be about (Select the best choice below.) O A. +2.0 OB. +1.0 OC. +0.5 D. -0.5 O E. -1.0 OF. - 2.0 Holding-period returns (%) 12 10- 8- ch 4 . 2- B&A Trucking (Y-Axis) 1 -14 -12 -10 -8 -6 -4 2 4 6 00- 10 12 14 2- 4 -6- -8- -10 -12- S&P 500 Index (X-Axis) (Portfolio beta and security market line) You own a portfolio consisting of the following stocks: :: The risk-free rate is 8 percent. Also, the expected return on the market portfolio is 14 percent. a. Calculate the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of the individual stock's expected return, where the weights are the percentage invested in each stock.) b. Calculate the portfolio beta. c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in part c, which stocks appear to be your winners and which ones appear to be losers? e. Why should you consider your conclusions in part d to be less than certain? a. The expected return of your portfolio is 16.05 %. (Round to two decimal places.) b. The beta of your portfolio is 0.97. (Round to two decimal places.) c. Assume the risk-free rate is 8 percent and the expected return on the market portfolio is 14 percent. Given that the stocks from your portfolio have been plotted on the graph below, draw the security market line on the graph. Note that you can click the magnifying glass button to enlarge the graph and use the Line Drawing Tool in the palette to draw the line Security Market Line 307 28- 5 26- 24 22- 3 20- 18- 1 16- Expected return (%) 14- ON ? 12- 10- 4 8- 6- 4- LN 0 0.5 1.5 2 1 Beta