You hold the positions in the table below. Assumed Price Shares Assumed Beta Ama

Question

You hold the positions in the table below. Assumed Price Shares Assumed Beta Amazon.com $ 35.00 128 4.33 Family Dollar Stores 15.00 232 .80 McKesson Corp 61.00 136 0.97 Schering-Plough Corp 31.00 471 0.55 What is the beta of your portfolio? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Portfolio beta If you expect the market to earn 16.40 percent and the risk-free rate is 8.00 percent, what is the required return of the portfolio? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Required return % Hints

Explanation / Answer

beta of portfolio = 1.86

required return = 8% + 1.86*(16.4% - 8%) = 22.88%

Amount weight beta weight*beta Amazon                        4,480.00 0.2756 4.33 1.1933 Family Dollar                        3,480.00 0.2141 0.80 0.1713 Mckesson                        8,296.00 0.5103 0.97 0.4950

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