Question

"An investor expects a return of 14.7% on her portfolio with a beta of 1.13. If the expected market risk premium decreases from 8% to 7%, what return should she now expect on the portfolio?"

Answer 1

Answer:

13.57%

Explanation:

Calculation for what return should she now expect on the portfolio

Expected return = 14.7% + 1.13(7% − 8%)

Expected return = 14.7%+1.13(-1%)

Expected return = 14.7%-1.13

Expected return = 13.57%

Therefore the return she should expect now on the portfolio will be 13.57%