Estimate the beta of the portfolio

Assignment Help Financial Management
Reference no: EM132008554

Suppose you held a well-diversified portfolio with a very large number of securities, and that the single index model holds.

If the standard deviation of your portfolio was 42% and the standard deviation of the market was 18%, what would be your estimate of the beta of the portfolio?

Hint: Note that a well-diversified portfolio will have a firm-specific variance and a residual standard deviation = 0%.

Enter your answer rounded to two decimal places. For example, if your answer is 12.345 then enter as 12.35 in the answer box.

Reference no: EM132008554

Questions Cloud

Calculate the expected return on that portfolio : What is the expected return and standard deviation of a portfolio that has 125% of its wealth in the S&P, financed by borrowing 25% of its wealth at the risk.
Erg theory and maslow hierachys : What are some differences between the ERG Theory and Maslow's Hierachys and some ways they are alike?
What is the purpose of the indenture : What is the purpose of the indenture? How do I identify sources of risk to the bondholder?
How much income should peck report in year : On December 1, year 1, Peck Advertising receives a $24,000 retainer fee for a two-year service contract. How much income should Peck report in year 1
Estimate the beta of the portfolio : If the standard deviation of your portfolio was 42% and the standard deviation of the market was 18%, what would be your estimate of the beta of the portfolio?
Topic related to employee references : What happened recently about the topic related to employee references? What can be the current events on employee reference?
Would you invest in this portfolio : f you expect to receive a rate of return 9% on this portfolio , would you invest in this portfolio? Explain?
Variety of incentives to encourage fdi inflows : Host countries can offer a variety of incentives to encourage FDI inflows - do these offer an unfair advantage?
Low-skilled minimum-wage employees : What are the challenges in motivating a) professionals and b) low-skilled minimum-wage employees?

Reviews

Write a Review

Financial Management Questions & Answers

  Create these synthetic positions using options

Create synthetic positions using any options of your chice. Discuss why an options trader would create these synthetic positions using options, and include the advantages and disadvantages of the trades. Also include a discussion on whether this synt..

  From a tax perspective

From a tax perspective, what do you view as some of the advantages and disadvantages of filing as a partnership? Please be specific and thorough in your response. List several examples of each.

  What is the npv of chad project if the discount rate

Chad lives in Tulsa, Oklahoma and makes $50,000 per year at his current job selling luxury real estate. Assume that Chad knows for sure that he would make $50,000 per year at his current job for the next 3 years. Chad is considering whether to quit h..

  Estimate the equity cost of capital for mackenzie

Mackenzie Company has a price of $38 and will issue a dividend of $2.00 next year. It has a beta of 1.5?, the? risk-free rate is 5.7%?, and the market risk premium is estimated to be 4.9%. Estimate the equity cost of capital for Mackenzie. Under the?..

  Providers of equity financing are interested in

All but which of the following are the three primary factors that providers of equity financing are interested in?

  What is the firm wacc and total corporate value

What is the firm’s WACC and total corporate value under each capital structure?

  Initial cash investment-calculate your return on investment

Suppose you purchase 750 shares of stock at $35 per share with an initial cash investment of $14,000. The call money rate is 5 percent and you are charged a 1.5 percent premium over this rate. Calculate your return on investment one year later if the..

  The bonds make semiannual payments

Ponzi Corporation has bonds on the market with 15.5 years to maturity, a YTM of 7.60 percent, and a current price of $1,063. The bonds make semiannual payments.

  The spot price of the market index rises

What is the profitor loss to a short position if the spot price of the market index rises to $920 at the expiration date?

  The growth rate of industrial production-inflation rate

Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 6% and IR 5%. A stock with a beta of 1 on IP and 0.4 on IR currently is expected to provide a rate..

  Consider the possibility of abandonment in answering

If success and failure are equally likely, what is the NPV of the project? Consider the possibility of abandonment in answering.

  Lenders take all the interest rate risk

Which of the following is the same synthetic position as short stock, long call? For CAM loans, lenders take all the interest rate risk.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd