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please help! :) 1. Which statement is TRUE? a. The y-intercept of the SML is the risk-free rate. b. If a stock's beta doubles, its
please help! :)
1. Which statement is TRUE? a. The y-intercept of the SML is the risk-free rate. b. If a stock's beta doubles, its required return would also double. C. In inflation increases, the slope of the SML will increase, but its intercept will stay the same. 2. You invest in the following portfolio. Compute the portfolio's beta. Stock A Stock B Risk-free asset Investment $50,000 $25,000 $25,000 Beta 2.0 1.2 ?? a. 1.30 b. 1.60 c. 1.75 3. A stock has a required return of 10%. The risk free rate is 5% and the market risk premium is 8%. What is the stock's beta? a. 16.7 b. 1.67 c. 0.625 d. 3.75 e. 0.875 4. The risk-free rate is 3% and the return on the market portfolio is 10%. What is the required return on a stock with a beta equal to 2.0? a. 17% b. 23% 13% d. 16% c. 5. You hold a portfolio consisting of a $10,000 investment in each of 10 different companies (so a $100,000 portfolio). The portfolio beta is 1.75. If you sell one of the stocks that has a beta for 2.0 for $10,000 and use the money to buy another stock with a beta of 0.20, what would our portfolio's new beta equal? a. 1.30 b. 1.32 C. 1.57 d. 1.65 e. 1.93 f. 1.95 Step by Step Solution
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