Portfollo retum and beta Personal Finance Problers Jartie Peters invested 5103,000 to set up the following porttolio cne year ago: a. Calculate the portfolo beta on the basis of the original cost figures. b. Calculate the percentage retum of each asset in the portfolio for the year. c. Calculate the percentage return of the portlolio on the basis of original cost, using income and gains during the year. d. Al the tme Jamie made his investments, investors were estmating that the market return for the coming year would be 1246 . The estimate of the risk-free rate of return averaged 3 ?s for the coming yeac. Calculate an expected rate of return for each stock on the basis of its beta and the expectations of markot and risk-free rebums. e. On the basis of the actual results, explain how each slock in the portfolio performed ditlerently relative to those CAPM-generated expectations of performiance. What factors could explain these dfferences? a. The portfolo beta on the basis of the original cost figures is (Round to two docimal places.) b. The percentage rotum for asset A for the year is X. (Round to two decimal places.) The percentage relum for asset B for the year is W. (Round to two decimal places.) The percentage return for asset C for the yoar is K. (Round to two decimal ploces.) The percentage return for asset D for the year is \$. (Round to two decimal places.) c. The percentage return of the portfolio on the basis of original cost, using income and gains during the year is K. (Round to two decimal places.) d. Ac the time Jamie made his investments, investors were estimating that the markot retum for the coming year would be 12% and the estimate of the risk-free rate of return avoraged 3% for the . coming year. The expected rate of retum for asset A is K. (Round to two decimal places.) The expectod rate of retum for asset B is \%. (Round to two decimal ploces) The expocted rate of retuan for asset C is %. (Round to two decimal places.) The expected raio of reoum for asset D is %. (Round to two decimal places.) 6. What factors could oxplain the differences between the actual returns of the assots and the CAPM expectod rearins? (Solect the best answer below.) e. What factors could explain the differences between the actual returns of the assets and the CAPM expected relums? (Select the best answer below.) A. The firm's characteristics may have changed such that the beta at the time of the purchase either overstated or understated the true value of bota that existed during that year. B. Ary underperformance could be due to any unsystematic factor which would have caused the firm to not do as well as expected. C. The beta, as a single measure, may not capture an the systematic tactors that cause the expectod return. D. All of the above. Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.)
