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(Portfolio beta and security market line) You own a portfolio consisting of the following stocks: The risk free rate is 4 porcent. Also, the expected retum on the market portfolio is 10 percent. a. Calculato the expected return of your portfolio (Hint: The expected return of a portfolio equals the weighted average of the Individual stocks expected return where the weights are the percentage invested in each stock.) b. Calculate the portfolio beta G. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in parte, which stocks appear to be your winners and which ones appear to be losers? .. Why should you consider your conclusions in part d to be less than certain? a. The expected return of your portfolio is 1% (Round to two decimal places) b. The beta of your portfolio is . (Round to two decimal places) c. Assume the risk-free rate is 4 percent and the expected return on the market portfolio is 10 percent. Given that the stocks from your portfolio have been plotted on the graph below, draw the security market line on the graph Note that you can click the magnifying glass button to enlarge the graph and use the Line Drawing Tool in the palette to draw the line Security Market Line Q Click the graph, choose a tool in the palette and follow the instructions to create your graph. 0. the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of t b. Calculate the portfolio beta. C. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in part c, which stocks appear to be your winners and which ones appear to be losers? e. Why should you consider your conclusions in part d to be less than certain? Security Market Line 30- 25 20- Expected return (%) 15- 21: 10- -0.5 15 Beta a Calculate the expected return of your portfolio (Hint: The expected return of a portfolio equals the weighted average of the individual stock's expected return, wher b. Calculate the portfolio bota. c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in parte, which stocks appear to be your winners and which ones appear to be lovers? e. Why should you consider your conclusions in part d to be less than certain Stock 1 is a (Select from the drop down menu.) Stock 2 is a (Select from the drop-down menu.) Stock 3 is a (Select from the drop down menu.) Stock 4 is a (Select from the drop-down menu.) Stock 5 is a (Select from the drop-down menu.) .. Why should you consider your conclusions in part d to be less than certain? (Select the best choice below.) OA. The conclusions are less than certain because it is possible to to draw an incorrect security market line by using bad estimates in the data. OB. The conclusions are less than certain because the capital asset pricing model is based on some unrealistic assumptions. OC. The conclusions are less than certain because the market data is not possible to obtain, OD. The conclusions are less than certain because the investor's preference toward risk is hard to estimate. Click the graph, choose a tool in the palette and follow the instructions to create your graph Data Table - Stock Percentage of Portfolio Beta 1 10% 1.00 2 25% 0.75 3 15% 1.30 4 30% 0.60 5 20% 1.20 (Click on the icon in order to copy its contents into a spreadsheet.) Expected Return 12% 11% 15% 9% 14% ess sible itala Print Done ket= (Portfolio beta and security market line) You own a portfolio consisting of the following stocks: The risk free rate is 4 porcent. Also, the expected retum on the market portfolio is 10 percent. a. Calculato the expected return of your portfolio (Hint: The expected return of a portfolio equals the weighted average of the Individual stocks expected return where the weights are the percentage invested in each stock.) b. Calculate the portfolio beta G. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in parte, which stocks appear to be your winners and which ones appear to be losers? .. Why should you consider your conclusions in part d to be less than certain? a. The expected return of your portfolio is 1% (Round to two decimal places) b. The beta of your portfolio is . (Round to two decimal places) c. Assume the risk-free rate is 4 percent and the expected return on the market portfolio is 10 percent. Given that the stocks from your portfolio have been plotted on the graph below, draw the security market line on the graph Note that you can click the magnifying glass button to enlarge the graph and use the Line Drawing Tool in the palette to draw the line Security Market Line Q Click the graph, choose a tool in the palette and follow the instructions to create your graph. 0. the expected return of your portfolio. (Hint: The expected return of a portfolio equals the weighted average of t b. Calculate the portfolio beta. C. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in part c, which stocks appear to be your winners and which ones appear to be losers? e. Why should you consider your conclusions in part d to be less than certain? Security Market Line 30- 25 20- Expected return (%) 15- 21: 10- -0.5 15 Beta a Calculate the expected return of your portfolio (Hint: The expected return of a portfolio equals the weighted average of the individual stock's expected return, wher b. Calculate the portfolio bota. c. Given the preceding information, plot the security market line on paper. Plot the stocks from your portfolio on your graph. d. From your plot in parte, which stocks appear to be your winners and which ones appear to be lovers? e. Why should you consider your conclusions in part d to be less than certain Stock 1 is a (Select from the drop down menu.) Stock 2 is a (Select from the drop-down menu.) Stock 3 is a (Select from the drop down menu.) Stock 4 is a (Select from the drop-down menu.) Stock 5 is a (Select from the drop-down menu.) .. Why should you consider your conclusions in part d to be less than certain? (Select the best choice below.) OA. The conclusions are less than certain because it is possible to to draw an incorrect security market line by using bad estimates in the data. OB. The conclusions are less than certain because the capital asset pricing model is based on some unrealistic assumptions. OC. The conclusions are less than certain because the market data is not possible to obtain, OD. The conclusions are less than certain because the investor's preference toward risk is hard to estimate. Click the graph, choose a tool in the palette and follow the instructions to create your graph Data Table - Stock Percentage of Portfolio Beta 1 10% 1.00 2 25% 0.75 3 15% 1.30 4 30% 0.60 5 20% 1.20 (Click on the icon in order to copy its contents into a spreadsheet.) Expected Return 12% 11% 15% 9% 14% ess sible itala Print Done ket=

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