Homework 9 - Fall 2008 Engineering 120 Industrial...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Fall 2008 Engineering 120 Industrial Engineering & Operations Research November 17, 2008 Page 1 of 1 Homework #9 1. (15 points) You want to create a portfolio equally as risky as the market, and you have $1,000,000 to invest. Given this information, fill in the rest of the following table: Asset Investment Beta Stock A $175,000 .80 Stock B $300,000 1.30 Stock C 1.50 Risk-free asset 2. (20 points) Your goal is to create a portfolio that has only 70% of the risk of the overall market. X has a beta of 1.5 and Y has a beta of 2.0. Expected return of Y is 10 percent more than the expected return of X. Risk-free rate is 5 percent. Assume that the CAPM holds. What is the expected return of the portfolio? 3. (25 points) True/False? Explain: a. Suppose that a portfolio satisfies the CML equation. Then, it has no nonsystematic risk. b. Beta of a portfolio on the CML must be equal to 1. c. Suppose that a portfolio is a combination of the risk-free asset and the market portfolio where the weights on both are positive. Then, its beta satisfies: 0weights on both are positive....
View Full Document

Page1 / 2

Homework 9 - Fall 2008 Engineering 120 Industrial...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online