Chap11Real

# Chap11Real - Homework Manager Corporate Finance FIN301-004...

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Question 1: Score 1/1 Your response Correct response Determining Portfolio Weights A portfolio has 65 shares of Stock A that sell for \$73 per share and 120 shares of Stock B that sell for \$62 per share. The weight of A is .3894 (50%) and the weight of B is .6105 (50%). (Round your answers to 4 decimal places.) Determining Portfolio Weights A portfolio has 65 shares of Stock A that sell for \$73 per share and 120 shares of Stock B that sell share. The weight of A is .3894 and the weight of B is .6105 . (Round your answers to 4 decimal pl Feedback: The portfolio weight of an asset is equal to the total investment in that asset divided by the total portfolio value. First, we will find the portfolio value, which is: Total value = 65(\$73) + 120(\$62) Total value = \$12,185 The portfolio weight for each stock is: WeightA = 65(\$73)/\$12,185 WeightA = 0.3894 WeightB = 120(\$62)/\$12,185 WeightB = 0.6106 Question 2: Score 1/1 Your response Correct response Portfolio Expected Return You own a portfolio that has \$1,800 invested in Stock A and \$1,800 invested in Stock B. If the expected returns on these stocks are 9 percent and 13 percent, respectively, the expected return on the portfolio is 11 (100%) percent. (Input answer as a percent rounded to 2 decimal places, without the percent sign.) Portfolio Expected Return You own a portfolio that has \$1,800 invested in Stock A and \$1,800 invested in Stock B. If the expecte these stocks are 9 percent and 13 percent, respectively, the expected return on the portfolio is 11 per answer as a percent rounded to 2 decimal places, without the percent sign.) Feedback: The expected return of a portfolio is the sum of the weight of each asset times the expected return of each asset. The total value of the portfolio is: Total value = \$1,800 + 1,800 Total value = \$3,600 So, the expected return of this portfolio is: E(Rp) = (\$1,800/\$3,600)(0.09) + (\$1,800/\$3,600)(0.13) E(Rp) = 0.11 or 11% Question 3: Score 1/1 Your response Correct response Portfolio Expected Return You own a portfolio that is 50 percent invested in Stock X, 38 percent in Stock Y, and 12 percent in Stock Z. The expected returns on these three stocks are 17 percent, 11 percent, and 19 percent, respectively. The expected return on the portfolio is 15 (100%) percent. (Input answer as a percent rounded to 2 decimal places, without the percent sign.) Portfolio Expected Return You own a portfolio that is 50 percent invested in Stock X, 38 percent in Stock Y, and 12 percent in S expected returns on these three stocks are 17 percent, 11 percent, and 19 percent, respectively. Th return on the portfolio is

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## This note was uploaded on 10/10/2010 for the course FIN 301 taught by Professor Andelin,stevenle during the Spring '07 term at Penn State.

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Chap11Real - Homework Manager Corporate Finance FIN301-004...

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