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Portfolio Beta Jerry's portfolio is invested in...

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Portfolio Beta Jerry's portfolio is invested in five stocks (that is, each stock in the portfolio has a weight of 0.20) and has a required return of 9.4%. The risk-free rate is 5% and the market risk premium is 4%. What is the portfolio's beta? Assume that Jerry's is on the SML. A. 0.800 B. 1.100 C. 1.250 D. 1.400 E. 1.550 The last stock added to this portfolio is Lauren Clothing Co., which has a betta of 0.90. What was the portfolio's beta before Lauren's stock was added? (hint: Remember that it was a four-stock portfolio before the last stock was added). A. 1.050 B. 1.150 C.1.225 D. 1.275 E. 1.250 7. a financiakll planenr is examinign the portfolios held by several clients. the protfolios described below. Which one is likely to have the smallest standard deviation: 1. a portfolio containing only microsoft stock 2. portfolio containing microsoft,apple computer, and google 3. portfolio consisting of about 3 randomly selecred stocks 4. a portfolio consisting of about 30 randomly selected stocks 5. portfolio consisting of about 30 technology stocks the tradeoff between risk and return is a cornerstone concept in finance. if a security offers a higher expected returnit must have higher risk. looking at the two stocks described. they have the same rik but one stock has a higher expected return. does this example contradict the tradeoff between risk and return? 1. yes 2. no suppose the market risk premium is currently 6%. if investors were to become more risk-avers, the market risk premium might increase to 8%. if investors become more risk-averse what effect would you expect this to have on the prices of most financial assets? 1. prices decrease 2. prices increas 3. prices would be unaffected

 

Paper#10267 | Written in 18-Jul-2015

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