1. Your investment club has only two stocks in its portfolio. $20,000 is invested in a stock with a beta of 0.5, and $50,000 is invested in a stock with a beta of 2.0. What is the portfolio’s beta? Do not round intermediate calculations. Round your answer to two decimal places.
2. AA Corporation’s stock has a beta of 0.9. The risk-free rate is 3%, and the expected return on the market is 13%. What is the required percentage rate of return on AA’s stock? Do not round intermediate calculations. Round your answer to one decimal place.
3.
Suppose that the risk-free rate is 5% and that the market risk premium is 8%. Round your answers to one decimal place.
- What is the required return on the market? %
- What is the required return on a stock with a beta of 1.0? %
- What is the required return on a stock with a beta of 1.3?. %
4.Suppose rRF = 5%, rM = 10%, and rA = 13%.
- Calculate Stock A’s beta. Round your answer to one decimal place.
If Stock A’s beta were 2.1, then what would be A’s new required rate of return? Round your answer to one decimal place.
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