A stock has a beta of .9 and an expected return of 11 percent. A risk-free asset

Question

A stock has a beta of .9 and an expected return of 11 percent. A risk-free asset currently earns 3.5 percent.

What is the expected return on a portfolio that is equally invested in the two assets? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

If a portfolio of the two assets has a beta of .29, what are the portfolio weights? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

If a portfolio of the two assets has an expected return of 11.75 percent, what is its beta? (Do not round intermediate calculations. Round your answer to 4 decimal places.)

If a portfolio of the two assets has a beta of 1.38, what are the portfolio weights? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

A stock has a beta of .9 and an expected return of 11 percent. A risk-free asset currently earns 3.5 percent.

Explanation / Answer

C&D don't match the portfolio contraint, portfolio has higher return than stock return, not possible to construct such a portfolio.

D -portfolio has higher beta than stock beta, not possible to construct a higher beta portfolio with low beta investments.

a) 0.5*11+0.5*3.5 7.25 b) 0.9*x=0.29 x=0.29/0.9 0.322222 answer 32.22

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