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zalisa [80]
2 years ago
14

UPS, a delivery services company, has a beta of 1.1, and Wal-Mart has a beta of 0.7. The risk-free rate of interest is 4% and th

e market risk premium is 7%. What is the expected return on a portfolio with 30% of its money in UPS and the balance in Wal-Mart
Business
1 answer:
Brrunno [24]2 years ago
7 0

Answer:

7.78%

Explanation:

Calculation for the expected return on a portfolio

First step is to calculate the portfolio beta

Portfolio beta=30%*1.1+30%*0.7=1.15

Portfolio beta=0.33+0.21

Portfolio beta=0.54

Now let calculate the expected return using this formula

Expected return=rf+(Portfolio beta*mrp)

Let plug in the formula

Expected return=4%+(0.54*7%)

Expected return=7.78%

Therefore the expected return on a portfolio is 7.78%

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<h3>What is the present value?</h3>

The present value of the bond is the sum of the the bonds discounted cash flows.

Present value can be calculated using a financial calculator:

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