Ask Question
26 October, 12:40

Suppose the risk premium on the market portfolio is estimated at 8% with a standard deviation of 22% You decide to put 25% of your money in Toyota and 75% of your money in Ford Suppose the beta of Toyota = 1.10 Suppose the beta of Ford = 1.25 What is the risk premium of your portfolio?

+3
Answers (1)
  1. 26 October, 13:37
    0
    9.7%

    Explanation:

    For computing the risk premium, first we have to determine the beta portfolio which is shown below:

    Portfolio beta = 0.25 * 1.10 + 0.75 * 1.25

    = 0.275 + 0.9375

    = 1.2125

    Now the risk premium is

    = Portfolio beta * risk premium on the market portfolio

    = 1.2125 * 8%

    = 9.7%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suppose the risk premium on the market portfolio is estimated at 8% with a standard deviation of 22% You decide to put 25% of your money in ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers