Risk and Return Use the following data to explore the risk-return relation and the concept of beta for Apple stock, Kroger stock, and the S&P 500 market index:

Part 2: Required Return

E. Calculate the expected return on the market according to: Expected Return on Market = Risk-Free Rate + Market Risk Premium. Also calculate the required return for Apple and Kroger according to: Required Return = Risk-Free Rate + (Beta)(Market Risk Premium).

F. If you formed a portfolio that consisted of 60% Apple stock and 40% Kroger stock, calculate the beta.

G. Calculate the portfolio beta of the four-stock portfolio and the required return on the portfolio.

c D E 5 6 7 Part 1: Risk and Beta 8 9 Year 10 11 12 13 14 15 16 Apple Stock Price 20201 2019 2018 2017 2016 2015 Kroger Stock Price $252.92 $156.23 $169.23 $125.17 $108.41 $112.98 S&P 500 Market Index $30.71 $27.66 $27.32 $29.52 $31.80 $33.37 3,234.85 2,531.94 2,753.15 2,276.98 2,043.94 2,058.20 66 Part 2: Required Return 67 68 69 70 5.60% Market risk premium: RPM Risk-free rate: Por= 0.70% Expected return on the market:rm = 72 E) Required Return 73 74 75 76 77 78 Apple Required Return = Kroger Required Return = 89 G) Required Portfolio Return 90 91 Beta Portfolio Weight 92 93 Apple Kroger Stock D Stock C 25% 15% 40% 20% 94 1.52 1.42 95 96 97 Portfolio Beta = 98 Risk-free rate 99 100 101 102 Market Risk Premium Portfolio Beta Required Return on Portfolio