What is the expected return of the portfolio

Reference no: EM13205690

Assume that CAPM holds, Your goal is to create a portfolio of stocks X, Y, and the risk-free asset. The beta of the portfolio is P = 0:70. X has a beta of 1:5 and Y has a beta of 2:0. Expected return of Y is 10% more than the expected return of X. Risk-free rate is 5%. What is
the expected return of this portfolio?

Reference no: EM13205690

Questions Cloud

State heat the ionic polymerization : Why must the free-radical polymerization reaction be heated when it is not necessary to heat the ionic polymerization

How to vary government spending to combat a recession : If the government had the option to either make changes to the tax rates or vary government spending to combat a recession that is already in progress, which of these two fiscal policies do you think would have a greater time lag to see its effect..

State e1 mechanisms a little clearer : E1 mechanisms a little clearer? maybe make a chart with simmilarities and differences and how to know which one is which?

Evaluate the value of each investment : Calculate the value of each investment based on your required rate of return and which investment would you select?

What is the expected return of the portfolio : Assume that CAPM holds, Your goal is to create a portfolio of stocks X, Y, and the risk-free asset. The beta of the portfolio is P = 0:70. X has a beta of 1:5 and Y has a beta of 2:0. Expected return of Y is 10% more than the expected return of X...

Compute the entropy change of the system : A solution of water at 30 degrees Celsius is placed in a freezer at a constant temperature of -8 degrees Celsius. Calculate the entropy change of the system, surroundings, and the universe.

What is the price of a call option with the same exercise : Stock A is currently selling for $37 per share. A put option with an exercise price of $45 sells for $8 and expires in four months. If the risk-free rate of interest is 2:3% per year, compounded daily, what is the price of a call option with the s..

State the values of the specific rotation : The values of the specific rotation, [alpha]20D, for the alpha and beta anomers of D-galactose are 150.7 and 52.8 degrees, respectively. A mixture that is 20% of alpha-D-galactose and 80% beta-D-galactose is dissolved in water at 20 degrees C.

Why arent wages falling so to clear market in equilibrium : Efficiency wage models are sometimes used to explain the existence of involuntary unemployment in the labour market. Provide a short description of the shirking model. Why can it be in a firm's interest to increase the wage above what is paid by o..

User Account

All Pages