Answer:
- a. What is the portfolio weight of each stock?
Stock J 0,5047
Stock K 0,4953
- b. What is the expected return of your portfolio?
Stock J 6,69%
Stock K 5,25%
Portfolio : 11,94%
Explanation:
To find the Beta that equals to market we need to know how much is x (weight of each stock in the portfolio) with an equation of one variable that equals to 1.
Portoflio with the same risk as the market means a beta of 1,00
1,23 (x) + 0,84 (1-x) = 1 Stock J = 0,4103
1,23x + 0,84 - 0,84x = 1 Stock K = 0,5897
1,23x - 0,84x = 0,16
0,39x = 0,16
x = 0,16/0,39
x = 0,4103
The expected return of the portfolio it's defined by the weight of each stock and the expected return.
Stock J 13,25% 0,5047 6,69%
Stock K 10,60% 0,4953 5,25%
Portfolio 1,00 11,94%
Answer:
b) Reactive
Explanation:
A reactive approach is when managers respond to situations and problems as they occur rather than plan for them before hand as this is an added cost.
Proactive managers seek out opportunities to always input CSR in their strategies. Accommodative strategies and defensive strategies build in some leeway. None of these options completely discount csr as a cost as does the reactive style.
Hope that helps.