Expected return on portfolio and expected beta on portfolio

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Reference no: EM131615836

Responding to Ramses request, the final discussion will be applicable to the final. We will each pick two stocks. We are going to assume we own equal amounts of the two stocks in our portfolio. We are going to find the expected return on the portfolio and expected beta on the portfolio. For the expected return on the individual stocks we will use the 52 week change in the stock. You can find the Beta and the 52 week change in Yahoo Finance under the Statistics tab. I am going to choose Pepsi (PEP) and Goldman Sachs (GS)

PEP

E(r) = 8.38%

Beta = 0.7

E(r) = 38.45%

Beta = 1.39

So for the portfolio for both expected return and for the beta, I take the weights of each holding, multiply it by the return/beta and then add them up. The weights are 50% since I own equal amounts of each

Portfolio

E(r) = (.5*.0838)+(.5*.3845) = .234=23.4%

Beta = (.5*.7)+(.5*1.39) = 1.045

Reference no: EM131615836

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