Log in
Finance
1
answer
0
watching
216
views

What are the betas listed for these companies?

Wells Fargo beta = 1.03

IBM beta = 0.87

1. If you made an equal dollar investment in each stocks what would be the beta of your portfolio?

2. If you made 70% of dollar investment in stock A, and 30% of dollar investment in stock B, what would be the beta of your portfolio? Please show your work.

3. Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on these two stocks. Assumptions and Data: Note that you will need the risk-free rate and the market risk premium. Assume a 5% market risk premium. You will use the current 2.21 yield on 10-year Treasury securities as the risk-free rate to estimate the required rate of return on stocks.

4. Compare the required return on these stocks calculated using CAPM in question #3 against their historical return over the last 52 weeks (Wells Fargo 59.99) and IBM (182.79). Is there a difference between these returns? Is this a problem? Why is there a difference?

Watch
1
answer
0
watching
216
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Hubert Koch
Hubert KochLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

What are the betas listed for these companies? Wells Fargo beta = 1.03 BM beta = 0.87 1.

1. Apply the Capital Asset Pricing Model (CAPM) Security Market Line to estimate the required return on these two stocks. Assumptions and Data: Note that you will need the risk-free rate and the market risk premium. Assume a 5% market risk premium. You will use the current 2.21 yield on 10-year Treasury securities as the risk-free rate to estimate the required rate of return on stocks.

2.. Compare the required return on these stocks calculated using CAPM in question #1 against their historical return over the last 52 weeks (Wells Fargo 59.99) and IBM (182.79). Is there a difference between these returns? Is this a problem? Why is there a difference?

You are a small money manager managing $9,000,000 in assets. Your investment portfolio consists of 10% T-bills (with an estimated beta = 0), 15% bonds (with an estimated beta = 0.70), 35% mid-cap stocks (with an estimated beta = 1.00), and 40% growth stocks (with an estimated beta = 1.40).

The risk-free rate, rRF, is 3.5%. The market risk premium, (rM - rRF), is 5.0%. What is the required rate of return on your investment portfolio? (10 points)

If you switch $450,000 out of T-bills and invest $300,000 of it in growth stocks and $150,000 of it in mid-cap stocks, what would be the required rate of return on your portfolio? (10 points

You are a small money manager managing $9,000,000 in assets. Your investment portfolio consists of 10% T-bills (with an estimated beta = 0), 15% bonds (with an estimated beta = 0.70), 35% mid-cap stocks (with an estimated beta = 1.00), and 40% growth stocks (with an estimated beta = 1.40).

The risk-free rate, rRF, is 3.5%. The market risk premium, (rM - rRF), is 5.0%. What is the required rate of return on your investment portfolio? (10 points)

If you switch $450,000 out of T-bills and invest $300,000 of it in growth stocks and $150,000 of it in mid-cap stocks, what would be the required rate of return on your portfolio? (10 points

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in