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Author Question: Both assets B and C plot on the SML. Asset B has a beta of 1.3 and an expected return of 13.1. Asset ... (Read 113 times)

bucstennis@aim.com

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on: Jul 10, 2018
Both assets B and C plot on the SML. Asset B has a beta of 1.3 and an expected return of 13.1. Asset C has a beta of 0.50 and an expected return of 7.50. The risk-free rate is 4 and the expected return on the market portfolio is 11.
 
  If you wish to hold a portfolio consisting of assets B and C, and have a portfolio beta equal to 1.0, what proportion of the portfolio must be in asset C?
  A) 0.375
  B) 0.50
  C) 0.625
  D) 0.75

Question 2

A review of the Housing Affordability Index indicates that since the early 1990s, housing affordability has
 
  A)
 
  had an overall upward trend until about 2004.
  B)
 
  has remained relatively constant.
  C)
 
  has had an overall downward trend.
  D)
 
  has had dramatic upward and downward swings.


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ApricotDream

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: A
Explanation: A) P = w  B + (1 - w)  C = 1.0 = w  1.3 + (1 - w)  0.50, w = 0.375.

Answer to Question 2

A


bucstennis@aim.com

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Reply #2 on: Jul 10, 2018
TY


ApricotDream

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Reply #3 on: Jul 10, 2018
Happy to Help


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