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  • Solution - Q27

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    anand kumar
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    This document contains information about 4 assets in a portfolio including their cost, beta, yearly income, current value, and expected returns. It then calculates the portfolio's overall beta, returns based on each asset, expected returns using CAPM, and compares the actual versus expected returns based on beta. The portfolio has a beta of 1.13, an expected return of 10.375% based on the individual asset weights and returns, and the actual returns are generally in line with or higher than the expected returns calculated from each asset's beta.

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    This document contains information about 4 assets in a portfolio including their cost, beta, yearly income, current value, and expected returns. It then calculates the portfolio's overall beta, returns based on each asset, expected returns using CAPM, and compares the actual versus expected returns based on beta. The portfolio has a beta of 1.13, an expected return of 10.375% based on the individual asset weights and returns, and the actual returns are generally in line with or higher than the expected returns calculated from each asset's beta.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    18 views3 pages

    Solution - Q27

    Uploaded by

    anand kumar
    This document contains information about 4 assets in a portfolio including their cost, beta, yearly income, current value, and expected returns. It then calculates the portfolio's overall beta, returns based on each asset, expected returns using CAPM, and compares the actual versus expected returns based on beta. The portfolio has a beta of 1.13, an expected return of 10.375% based on the individual asset weights and returns, and the actual returns are generally in line with or higher than the expected returns calculated from each asset's beta.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    Asset Cost Beta Yearly Income Value Today

    A 20000 0.80 1600 20000


    B 35000 0.95 1400 36000
    C 30000 1.50 0 34500
    D 15000 1.25 375 16500

    A) Portfolio Beta

    Asset Weight = Cost Beta Weighted Value

    A 20000 0.80 16000


    B 35000 0.95 33250
    C 30000 1.50 45000
    D 15000 1.25 18750
    TOTAL 100000 113000

    Portfolio Beta = Weighted Value/Total of Wei 1.13

    B) Percentage Return on each asset

    Asset Cost Yearly Income Value Today Return on Asset

    A 20000 1600 20000 1600


    B 35000 1400 36000 2400
    C 30000 0 34500 4500
    D 15000 375 16500 1875

    C) Portfolio Return

    Asset Percentage Return


    Weight = Cost Weighted Value

    A 8.00% 20000 1600


    B 6.86% 35000 2400
    C 15.00% 30000 4500
    D 12.50% 15000 1875
    TOTAL 100000 10375

    Portfolio Beta = Weighted Value/Total of Wei 10.375%

    D) Expected Return - CAPM Risk Free 4%


    Market Return 10%

    Asset Beta Expected Return


    A 0.80 8.80%
    B 0.95 9.70%
    C 1.50 13.00%
    D 1.25 11.50%

    D) Expected Return - CAPM v/s Actual Return

    Beta based on
    Asset Beta Expected ReturnActual Return Actual Return

    A 0.80 8.80% 8.00% 0.67


    B 0.95 9.70% 6.86% 0.48
    C 1.50 13.00% 15.00% 1.83
    D 1.25 11.50% 12.50% 1.42
    Percentage Return

    8.00%
    6.86%
    15.00%
    12.50%

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