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Portfolio beta and CAPM: You are putting together a portfolio made up of four different stocks. You are considering two possible weightings. a. What is the beta on each portfolio? b. Which portfolio is risker c. If the risk free rate of interest were 5 percent and the market risk premium were 7.5 percent, what rate of return would you expect to earn from each of the portfolios? Portfolio Weightings Asset Beta First Portfolio Second Portfolio A 2.2 15% 35% B 1.1 15% 35% C 0.45 35% 15% D -1.7 35% 15% a. The beta on the first portfolio is _____.( Round to three decimal places.) The beta on the second portfolio is _____. (Round to three decimal places.) b. Which portfolio is risker? (Select the best choice below) a. the second portfolio because the beta is smaller. b. the first portfolio because the beat is larger. c. the first portfolio because the beta is smaller. d. the second portfolio because the beta is larger. c. If the risk free rate of interest were 5 percent and the market risk premium were 7.5 percent, what were 7.5 %, then the rate of return on the first portfolio is expected to be ______%. If the risk free rate of interest were 5% and the market risk premium were 7.5%, then the rate of return on on the the second portfolio is expected to be _____%.( Round to two decimal places)
The stock with the lowest beta (0.76) is Apple Inc. stock. The stock with the highest beta (3.29) is Facebook Inc. stock. Beta for Apple Inc. stock is less that 1, it tells us that stock price is less volatile and risky than mark..
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