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A share has a beta of 1.4 and an expected return of 16%. A-(Answered)

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A share has a beta of 1.4 and an expected return of 16%. A risk-free asset currently earns 6.25%.

  1. What is the expected return on a portfolio that is equally invested in the two assets? (4 Mark)
  2. If a portfolio of the two assets has a beta of 0.8, what are the portfolio weights? (4 Mark)
  3. If a portfolio of the two assets has an expected return of 12%, what is its beta? (5 Mark)
  4. If a portfolio of the two assets has a beta of 2.80, what are the portfolio weights? (4 Marks) How do you interpret the weights for the two assets in this case? Explain. (3 Mark)

 

Paper#9256551 | Written in 27-Jul-2016

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