You own a $222,000,000 portfolio that is invested in Stocks A and B.The portfolio beta is equal to the market beta.Stock A has an expected return of 18.7 percent and has a beta of 1.42.Stock B has a beta of 0.88.What is the value of your investment in Stock A?
A)$38,600
B)$42,333
C)$44,500
D)$49,333
E)$47,200

Question

Quizplus · Accepted Answer

β_P = 1.0 = 1.42_A + [0.88 × (1 - A)]; A = 0.222222Investment in Stock A = $222,000 × 0.222222 = $49,333

You Own a $222,000,000 Portfolio That Is Invested in Stocks