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Portfolio weight of stock-expected return of your portfolio

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Reference no: EM13937933

Stock J has a beta of 1.28 and an expected return of 13.56 percent, while Stock K has a beta of 0.83 and an expected return of 10.5 percent. You want a portfolio with the same risk as the market.

Requirement 1:

What is the portfolio weight of each stock? (Do not round intermediate calculations. Round your answers to 4 decimal places (e.g., 32.1616).)

  Stock J                  

  Stock K                 

Requirement 2:

What is the expected return of your portfolio? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Expected return of the portfolio               %  

Verified Expert

The solution requires calculation of weights of stock and expected return of portfolio. The weights have been calculated using the beta of stocks and market beta of 1 (risk measurement). The weights so calculated are 0.3778 and 0.6222 of Stock J and K resp. and the expected return of portfolio is 11.66%.

Reference no: EM13937933

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