Reference no: EM132601452

Questions -

Q1. Stock Y has a beta of .9 and an expected return of 11.2 percent. Stock Z has a beta of .5 and an expected return of 7.2 percent. What would the risk-free rate have to be for the two stocks to be correctly priced?

Q2. A portfolio is invested 14 percent in Stock G, 54 percent in Stock J, and 32 percent in Stock K. The expected returns on these stocks are 9 percent, 15 percent, and 18 percent, respectively. What is the portfolio's expected return?

Q3. A stock has an expected return of 13 percent, its beta is 1.45, and the expected return on the market is 10.5 percent. What must the risk-free rate be?

Q4. You have $122,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create portfolio that has an expected return of 17.6 percent. Stock X has an expected return of 14 percent and a beta of 1.26, and Stock Y has an expected return of 9.5 percent and a beta of 1.00.

a. How much money will you invest in Stock Y?

b. What is the beta of your portfolio?

Q5. Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.90 .200 Repete Co. 1.59 .173 a. Assume these securities are correctly priced. Based on the CAPM, what is the expected return on the market? b. What is the risk-free rate?

Q6. You have $24,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 13 percent and Stock Y with an expected return of 12 percent. If your goal is to create portfolio with an expected return of 12.65 percent, how much money will you invest in Stock X and Stock Y?

Q7. What are the portfolio weights for a portfolio that has 126 shares of Stock A that sell for $36 per share and 106 shares of Stock B that sell for $26 per share?