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? $$\begin{array} { | l | l | l | l | }
\hline & \text { Price } & \text { Shares } & \text { Beta } \
\hline \text { Amazon.com } & \$ 40 & 100 & 3.8 \
\hline \text { Family Dollar Stores } & \$ 30 & 100 & 1.2 \
\hline \text { McKesson Corp } & \$ 50 & 100 & 0.4 \
\hline \text { Schering-Plough Corp } & \$ 20 & 100 & 0.5 \
\hline
\end{array}$$
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? $$\begin{array} { | l | l | l | l | } 
\hline & \text { Price } & \text { Shares } & \text { Beta } \
\hline \text { Amazon.com } & \$ 40 & 100 & 3.8 \
\hline \text { Family Dollar Stores } & \$ 30 & 100 & 1.2 \
\hline \text { McKesson Corp } & \$ 50 & 100 & 0.4 \
\hline \text { Schering-Plough Corp } & \$ 20 & 100 & 0.5 \
\hline
\end{array}$$
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 value of each position. The portfolio beta is 1.5. Using the CAPM formula, the required return is 3.5% + 1.5 * (12% - 3.5%) = 16.76%.

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