A portfolio consists of the following securities. What is the portfolio weight o
ID: 2613903 • Letter: A
Question
A portfolio consists of the following securities. What is the portfolio weight of stock C?
Multiple Choice
0.336
0.557
0.445
0.451
0.389
The risk-free rate is 3.5 percent. What is the expected risk premium on this security given the following information?
Multiple Choice
2.09 percent
4.15 percent
3.01 percent
3.20 percent
3.87 percent
The risk-free rate is 3.0 percent. What is the expected risk premium on this security given the following information?
Multiple Choice
3.20 percent
3.01 percent
3.80 percent
2.90 percent
4.15 percent
There is a 35 percent probability that a particular stock will earn a 16 percent return and a 65 percent probability that it will earn 10 percent. What is the risk-free rate if the risk premium on the stock is 7.5 percent? MultipleChoice 5.20 percent 4.60 percent 4.20 percent 5.80 percent 5.40 percent
Stock #Shares PPS A 200 $ 48 B 150 $ 33 C 350 $ 21Explanation / Answer
1-
share
no of shares
price per share
total value
Weight = value of stock in portfolio/total value of portfolio
A
200
48
9600
0.438356
B
150
33
4950
0.226027
C
350
21
7350
0.335616
total value portfolio
21900
Portfolio weight of stock C
0.336
2-
return on security
(.30*15%)+(.55*8%)+(.20*-11%)
6.70%
expected risk premium
(expected return-risk free rate)
6.7-3.5
3.2
3-
return on security
(.30*16%)+(.55*8%)+(.20*-12%)
6.80%
expected risk premium
(expected return-risk free rate)
6.8-3
3.8
4-
return on security
(.35*16%)+(.65*10%)
12.10%
expected risk premium
(expected return-risk premium)
12.1-7.5
4.6
1-
share
no of shares
price per share
total value
Weight = value of stock in portfolio/total value of portfolio
A
200
48
9600
0.438356
B
150
33
4950
0.226027
C
350
21
7350
0.335616
total value portfolio
21900
Portfolio weight of stock C
0.336
2-
return on security
(.30*15%)+(.55*8%)+(.20*-11%)
6.70%
expected risk premium
(expected return-risk free rate)
6.7-3.5
3.2
3-
return on security
(.30*16%)+(.55*8%)+(.20*-12%)
6.80%
expected risk premium
(expected return-risk free rate)
6.8-3
3.8
4-
return on security
(.35*16%)+(.65*10%)
12.10%
expected risk premium
(expected return-risk premium)
12.1-7.5
4.6
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