You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 10 percent and the risk-free rate is 4 percent, what is the required return of the portfolio?
$$\begin{array} { l r r r r }
& \text { Price } & \text { Shares } & \text { Beta } \
\text { Advarsed Micro Devices } & \$ 10 & 200 & 4.2 \
\text { FedEx Corp. } & \$ 100 & 50 & 1.1 \
\text { Microsoft } & \$ 30 & 150 & 0.7 \
\text { Sara Lee Corp. } & \$ 15 & 200 & 0.5
\end{array}$$
A) 12.37 percent
B) 9.73 percent
C) 10.17 percent
D) 11.68 percent

Question

You hold the positions in the following table. What is the beta of your portfolio? If you expect the market to earn 10 percent and the risk-free rate is 4 percent, what is the required return of the portfolio?
$$\begin{array} { l r r r r } 
& \text { Price } & \text { Shares } & \text { Beta } \
\text { Advarsed Micro Devices } & \$ 10 & 200 & 4.2 \
\text { FedEx Corp. } & \$ 100 & 50 & 1.1 \
\text { Microsoft } & \$ 30 & 150 & 0.7 \
\text { Sara Lee Corp. } & \$ 15 & 200 & 0.5
\end{array}$$
A) 12.37 percent
B) 9.73 percent
C) 10.17 percent
D) 11.68 percent

Quizplus · Accepted Answer

The beta of the portfolio is the weighted average of the betas of the individual stocks, where the weights are the proportions of the portfolio invested in each stock. In this case, the beta of the portfolio is:(0.42 * 200/850) + (0.11 * 50/850) + (0.07 * 150/850) + (0.05 * 200/850) = 1.168The required return of the portfolio is the risk-free rate plus the beta of the portfolio times the expected market return. In this case, the required return of the portfolio is:4% + 1.168 * 10% = 11.68%

You Hold the Positions in the Following Table A) 1237 Percent B) 9

You Hold the Positions in the Following Table A) 1237 Percent
B) 9