11 Jan Portfolio Weights

Portfolio Beta You have a portfolio with a beta of .92. What will be the new portfolio beta if you keep 70 percent of your money in the old portfolio and 30 percent in a stock with a beta of 1.52?

1.10

1.00

2.44

1.22

Average Return The past five monthly returns for PG Company are 2.00 percent, -3.0 percent, 5.00 percent, 4.5 percent, and 2.7 percent. What is the average monthly return?

11.23%

17.23%

3.45%

2.25%

Portfolio Beta You own $1,900 of City Steel stock that has a beta of 1.67. You also own $6,700 of Rent-N-Co (beta = 1.97) and $5,700 of Lincoln Corporation (beta = 1.07). What is the beta of your portfolio (closest to)?

1.57

1.00

3.52

4.71

Portfolio Return Year-to-date, Company O had earned a -3.70 percent return. During the same time period, Company V earned 9.6 percent and Company M earned 7.85 percent. If you have a portfolio made up of 40 percent Company O, 30 percent Company V, and 30 percent Company M, what is your portfolio return?
6.715%

13.75%

3.755%

21.15%

Expected Return Compute the expected return given these three economic states, their likelihoods, and the potential returns:

Economic State

Probability

Return

Fast Growth

.1

29%

Slow Growth

.8

14%

Recession

.1

-29%

14.3%

14.0%

11.2%

17.0%

Investment Return HillCom Corp stock was $75.30 per share at the end of last year. Since then, it paid a $2.80 per share dividend last year. The stock price is currently $78.30. If you owned 200 shares of HillCom, what was your percent return?

7.70%

3.72%

7.41%

3.58%

Investment Return MedTech Corp stock was $51.65 per share at the end of last year. Since then, it paid a $1.15 per share dividend. The stock price is currently $63.20. If you owned 100 shares of MedTech, what was your percent return?

20.09%

24.59%

18.20%

22.27%

Average Return The past five monthly returns for PG Company are 1.50 percent, -2.0 percent, 4.50 percent, 4.0 percent, and 2.2 percent. What is the average monthly return?

10.23%

14.23%

2.85%

2.05%

CAPM Required Return A company has a beta of 1.06. If the market return is expected to be 11.1 percent and the risk-free rate is 3.55 percent, what is the company’s required return?

11.55%

15.32%

11.77%

15.10%

Portfolio Weights An investor owns $17,000 of Adobe Systems stock, $20,000 of Dow Chemical, and $30,000 of Office Depot. What are the portfolio weights of each stock?

Adobe System = 0.25, Dow Chemical = 0.30, Office Depot = 0.45

Adobe System = 0.27, Dow Chemical = 0.33, Office Depot = 0.40

Adobe System = 0.33, Dow Chemical = 0.33, Office Depot = 0.33

Adobe System = 0.30, Dow Chemical = 0.25, Office Depot = 0.45