You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 12 percent and the risk-free rate is 3.5 percent, what is the required return of the portfolio?
$$\begin{array} { l r r r r }
& \text { Price } & \text { Shares } & \text { Beta } \
\text { Advarsed Micro Devices } & \$ 40 & 100 & 3.8 \
\text { FedEx Corp. } & \$ 30 & 100 & 1.2 \
\text { Microsoft } & \$ 50 & 100 & 0.4 \
\text { Sara Lee Corp. } & \$ 20 & 100 & 0.5
\end{array}$$
A) 14.21 percent
B) 16.76 percent
C) 13.97 percent
D) 15.38 percent

Question

You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 12 percent and the risk-free rate is 3.5 percent, what is the required return of the portfolio?
$$\begin{array} { l r r r r } 
& \text { Price } & \text { Shares } & \text { Beta } \
\text { Advarsed Micro Devices } & \$ 40 & 100 & 3.8 \
\text { FedEx Corp. } & \$ 30 & 100 & 1.2 \
\text { Microsoft } & \$ 50 & 100 & 0.4 \
\text { Sara Lee Corp. } & \$ 20 & 100 & 0.5
\end{array}$$
A) 14.21 percent
B) 16.76 percent
C) 13.97 percent
D) 15.38 percent

Quizplus · Accepted Answer

To find the portfolio beta, calculate the weighted average of the individual betas based on the market value of each position. Then, use the CAPM formula: Required Return = Risk-free rate + Portfolio Beta * (Market Return - Risk-free rate).

You Hold the Positions in the Following Table A) 1421 Percent B) 16

You Hold the Positions in the Following Table A) 1421 Percent
B) 16