Question
You hold three stocks in your portfolio. Using the information in the table below, answer the following questions. Weight Beta Expected Return Stock A 30%
You hold three stocks in your portfolio. Using the information in the table below, answer the following questions.
Weight | Beta | Expected Return | |
Stock A | 30% | 1.80 | 15% |
Stock B | 20% | 1.20 | 11% |
Stock C | 50% | 0.60 | 7% |
Show your work.
a. What is the beta of your portfolio?
b. What is the required return of the portfolio using CAPM? Assume the market return is 11% and the risk-free rate is 2%
c. What is the expected return of the portfolio?
d. Given the information that you have calculated, is the portfolio undervalued or overvalued? Explain.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Management For Decision Makers
Authors: Peter Atrill, Paul Hurley
2nd Canadian Edition
138011605, 978-0138011604
