Asset W has an expected return of 13.7 percent and a beta of 1.39. If the risk-f

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Question

Asset W has an expected return of 13.7 percent and a beta of 1.39. If the risk-free rate is 4.64 percent, complete the following table for portfolios of Asset W and a risk-free asset. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your portfolio expected return answers as a percentage and round to 2 decimal places (e.g., 32.16). Round your portfolio beta answers to 3 decimal places (e.g., 32.161).)

Percentage of

Portfolio

Portfolio in Asset W

Expected Return

Beta

n/r %

n/r

n/r %

n/r

n/r %

n/r

n/r %

n/r

100

n/r %

n/r

125

n/r %

n/r

150

n/r %

n/r

If the tax rate is 35 percent, what is the aftertax salvage value of the asset? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Aftertax salvage value

Explanation / Answer

Negative weight means borrowing at risk free rate and inveting asset w

Asset w(weight) Risk free asset(weight) Return Asset W Risk free return Expected Portfolio return Asset W beta Risk free beta Average Portfolio beta 0 100.00% 13.70% 4.64% 4.6400% 1.39 0 0 25% 75.00% 13.70% 4.64% 6.9050% 1.39 0 0.3475 50% 50.00% 13.70% 4.64% 9.1700% 1.39 0 0.695 75% 25.00% 13.70% 4.64% 11.4350% 1.39 0 1.0425 100% 0.00% 13.70% 4.64% 13.7000% 1.39 0 1.39 125% -25.00% 13.70% 4.64% 15.9650% 1.39 0 1.7375 150% -50.00% 13.70% 4.64% 18.2300% 1.39 0 2.085

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Asset W has an expected return of 13.7 percent and a beta of 1.39. If the risk-f

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