Asset W has an expected return of 11.4 percent and a beta of 1.40. If the risk-f

Question

Asset W has an expected return of 11.4 percent and a beta of 1.40. If the risk-free rate is 3.7 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 expected returns as a percent rounded to 2 decimal places, e.g., 32.16, and your beta answers to 3 decimal places, e.g., 32.161.)

If you plot the relationship between portfolio expected return and portfolio beta, what is the slope of the line that results? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Can't find the Table. Please try to use the relationship:

Let the portfolio asset be wp and risk free assets be wrf

Hence expected return = 3.7 + beta x Risk premium

Therefore Risk premium = (11.4 - 3.7)/beta=7.7/1.4=5.5%

for portfolio W, Return is 11.40% (Expected Return) = w x 11.4%

for Risk free assets Rf, Return is 3.7%(Rist free interest) = Rf x 3.7%

so if W = 150, return = 150 x 11.4% = $17.10

and if Rf=200, Interest income = 100 x 3.7% = $3.7

Hope this will help you to calculate the table.

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