You hold the positions in the table below. What is the beta of your portfolio? (

Question

You hold the positions in the table below.   

What is the beta of your portfolio? (Round your answer to 2 decimal places.)

If you expect the market to earn 20.5 percent and the risk-free rate is 7.0 percent, what is the required return of the portfolio? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

  

PRICE SHARES BETA   Advanced Micro Devices $ 18.20   201    4.6      FedEx Corp 118.00   70    2.0      Microsoft 26.00 157    1.8      Sara Lee Corp 20.75 212    1.7   

Explanation / Answer

Total value of portfolio= (18.20x201)+(118x70)+(26x157)+(20.75x212)= 20399.2

Wt of Advanced Micro Devices= (18.20x201)/20399.2= 17.94%

Wt of FedEx Corp= (118x70)/20399.2=40.49%

Wt of Microsoft= (26x157)/20399.2=20.01%

Wt of Sara Lee Corp= (20.75x212)/20399.2=21.56%

beta of your portfolio= (17.94%x4.6)+(40.49%x2)+(20.01%x1.8)+(21.56%x1.7)= 2.36

required return of the portfolio= Rf+beta(Rm-Rf)

required return of the portfolio= 7+2.36(20.5-7)= 38.86%

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