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Suppose that the S&P 500, with a beta of 1.0, has an expected return of 11% and T-bills provide a risk-free return of 6%.
a. What would be the expected return and beta of portfolios constructed from these two assets with weights in the S&P 500 of (i) 0; (ii) 0.25; (iii) 0.50; (iv) 0.75; (v) 1.0? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. How does expected return vary with beta?
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A company has a $36 million portfolio with a beta of 1.2. What trade is necessary to increase beta to 2.4?
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Suppose the price of a share XYZ is 100 at t=0. At t=1, the share-price either increases to 108 or decreases to 88. At t=2, the share-price will either be 120, or 96 (if the share goes up at t=1 and goes down at t=2 and if it goes down at t=1 and goe..
The future earnings, dividends, and common stock price of Callahan Technologies Inc. are expected to grow 7% per year. Callahan's common stock currently sells for $24.75 per share; its last dividend was $2.00; and it will pay a $2.14 dividend at the ..
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