Consider a portfolio consisting of the following three stocks: Portfolio Weight Volatility Correlation with Market Portfolio HEC Corp 0.26 13% 0.35 Green Midget 0.29 28% 0.52 Alive And...

80.2K

Verified Solution

Question

Finance

Consider a portfolio consisting of the following threestocks:
Portfolio Weight
Volatility
Correlation with Market Portfolio
HEC Corp
0.26
13%
0.35
Green Midget
0.29
28%
0.52
Alive And Well
0.45
11%
0.54
The volatility of the market portfolio is 10% and it has anexpected return of 8%. The risk-free
rate is 3%.
Compute the beta and expected return of each stock.
Using your answer from part (a), calculate the expected returnof the portfolio.
What is the beta of the portfolio?
Using your answer from part (c), calculate the expected returnof the portfolio and verify that it matches your answer to part(b).

Answer & Explanation Solved by verified expert

3.8 Ratings (545 Votes)

Formula Corsdsdm rf rmrfb Stock Portfolio weight w Volatility sd Correlation with market porfolio cor Beta coefficient b Expected return Er HEC Corp 26 13 035 04550 528 Green Midget 29 28 052 14560 1028 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Consider a portfolio consisting of the following threestocks:Portfolio WeightVolatilityCorrelation with Market PortfolioHEC Corp0.2613%0.35Green Midget0.2928%0.52Alive And Well0.4511%0.54The volatility of the market portfolio is 10% and it has anexpected return of 8%. The risk-freerate is 3%.Compute the beta and expected return of each stock.Using your answer from part (a), calculate the expected returnof the portfolio.What is the beta of the portfolio?Using your answer from part (c), calculate the expected returnof the portfolio and verify that it matches your answer to part(b).

	Portfolio Weight	Volatility	Correlation with Market Portfolio
HEC Corp	0.26	13%	0.35
Green Midget	0.29	28%	0.52
Alive And Well	0.45	11%	0.54