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uysha [10]
3 years ago
12

A stock has a beta of 1.48 and an expected return of 17.3 percent. A risk-free asset currently earns 4.6 percent. If a portfolio

of the two assets has a beta of .98, then the weight of the stock must be ________ and the risk-free weight must be ________..56; .44.34; .66.44; .56.66; .34.72; .28
Business
1 answer:
pshichka [43]3 years ago
3 0

Answer:

.66; .34

Explanation:

Calculation of weight of the stock and weight of the risk free asset

stock expected return = 17.3%

stock beta value = 1.48

risk free asset beta value is = 0

risk free asset return = 4.6

portfolio beta is = 0.98

let taken weight of the stock is X

so weight of the risk free asset is = 1-X

portfolio beta = stock weight*beta+riskfree weight*beta

0.98 = X*1.48+(1-X)*0

0.98= 1.48X+0

1.48X= 0.98

X = 0.66

66%

weight of the risk free asset is = 1-0.66

= 0.34

= 34%

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