Top Posters
Since Sunday
e
5
e
4
4
d
4
o
3
p
3
t
3
3
m
3
p
3
m
3
f
3
Home Q & A Board Other Fields Homework Help Business Finance
New Topic  
borteleto borteleto
wrote...
Go to Answer
Posts: 2477
Rep: 2 0
5 years ago
Bankers Corp. has a very conservative beta of .7, while Biotech Corp. has a beta of 2.1. Given that the T-bill rate is 5%, and the market is expected to return 15%, what is the expected return of Bankers Corp., Biotech Corp., and a portfolio composed of 60% of Bankers Corp. and 40% Biotech Corp.?

a.Solve this problem first by weighting the betas to calculate a portfolio beta, and then using CAPM to calculate the portfolio expected return.
b.Then solve the problem again by calculating the expected return of each asset and weighting those returns to calculate the portfolio expected return.
c.Why is Biotech Corp.'s expected return NOT three times that of Bankers Corp.?
Textbook 
Foundations of Finance

Foundations of Finance


Edition: 9th
Authors:
Read 55 times
2 Replies
Replies
Answer verified by a subject expert
guzmanguzman
wrote...
#1
Top Poster
Posts: 1067
Rep: 10 0
5 years ago
Sign in or Sign up in seconds to unlock everything for free
More solutions for this book are available here
1

Related Topics

borteleto Author
wrote...
#2
5 years ago
Smart ... Thanks!
New Topic      
Quick Reply
Explore
Post your homework questions and get free online help from our incredible volunteers
  950 People Browsing
 107 Signed Up Today
Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook
Live Chat
Related Images
  
 4435
  
 132
  
 232
Your Opinion
How often do you eat-out per week?
Votes: 79
Previous poll results: Do you trust social media networks with protecting your privacy?