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Portfolio Expected Return
Portfolio Expected Return
Stock A has an expected return of 15% and stock B has an expected return of 6%. However, the risk of stock A as measured by its variance is 3 times that of
stock B. If the two stocks are combined equally in a portfolio, what would be the portfolio’s expected return?
| Asset W has an expected return of 12.6 percent and a beta of 1.25. If the risk-free rate is 4.6 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Round your expected return answers to 2 decimal places. (e.g., 32.16) and beta answers to 3 decimal places. (e.g., 32.161)) |
| Percentage of | Portfolio | Portfolio | ||||||
| Portfolio in Asset W | Expected Return | Beta | ||||||
| 0% | % | 0 | ||||||
| 25 | % | 0.313 | ||||||
| 50 | % | 0.625 | ||||||
| 75 | % | 0.938 | ||||||
| 100 | % | 1.25 | ||||||
| 125 | % | 1.563 | ||||||
| 150 | % | 1.875 | ||||||
| If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? |
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