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CAPM Group Presentation-Syndicate 10
CAPM Group Presentation-Syndicate 10
(CAPM)
Presented by Syndicate 10:
Beta Coefficient
()
Problem 11
You own a stock portfolio invested :
25
20
15
40
percent
percent
percent
percent
in
in
in
in
stock
stock
stock
stock
P = 0.25(.75) + 0.20(1.90) +
0.15(1.38) +
0.40(1.16)
= 1.24
So, the Portfolio Beta is 1.24
Problem 12
You own a portfolio equally invested in
a risk-free asset and two stocks. If one
of the stocks has a beta of 1.85 and the
total portfolio is equally as risky as the
market, what must the beta be for the
other stock in your portfolio ?
X = 1.15
Problem 13
A stock has a Beta of 1.25, the expected
return on the market is 12 percent, and
the risk-free rate is 5 percent. What must
the expected return on this stock be?
=
1.25
RM =
12%
RF =
Expected Return ?
Problem 14
A stock has an expected return of 14.2
percent, the risk-free rate is 4 percent,
and the market risk premium is 7
percent. What must the beta of this
stock be?
E(Ri) = 1.42
Rf = 4 %
Risk Premium =
7%
So, the
?
Problem 15
A stock has an expected
return of 10.5 percent, its
beta is 0.73, and the risk-free
rate is 5.5 percent. What
must the expected return on
the market be?
Problem 16
A stock has an expected
return of 16.2 percent, a beta
of 1.75, and the expected
return on the market is 11
percent. What must the riskfree rate be?
Thank
You!