Calculate the change in return for each security

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Question: Referring to Problem I, using the portfolio beta, what would you expect the value of your portfolio to be if the market rallied 20%? Declined 20%?

Problem I: Referring to Problem II, assume you have a portfolio with $20,000 invested in each of investments A, B, and C. What is your portfolio beta?

Problem II: Assume the betas for securities A, B, and C are as shown here.

Security             Beta

A                       1.4

B                       0.8

C                     -0.9

a. Calculate the change in return for each security if the market experiences an increase in its rate of return of 13.2% over the next period.

b. Calculate the change in return for each security if the market experiences a decrease in its rate of return of 10.8% over the next period.

c. Rank and discuss the relative risk of each security on the basis of your findings. Which security might perform best during an economic downturn? Explain.

Reference no: EM131624407

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