Business & Finance homework help. Module 6 Critical Thinking Assignment
The Meaning and Measurement of Risk and Return

Problem 6-1: Portfolio Beta (Chapter 6)
Your investment club has 3 stocks in its portfolio, as follows:
Invested Beta
20,000 0.6
40,000 1.6
40,000 1.2
What is the portfolio’s beta?
Problem 6-2 Rate of return (Chapter 6)
BB Corporation’s stock has a beta of 1.2. The risk-free rate is 5% and the
expected return on the market is 13%. What is the required rate of return
on BB Corporation’s stock?
Problem 6-3 CAPM (Chapter 6)
Suppose the risk-free rate is 4% and the market risk premium is 8%.
What is the required rate of return on (1) the market, (2) a stock with a beta
of .8, and (3) a stock with a beta of 1.8?
Problem 6-4 Calculating beta (Chapter 6)
Given the following:
Rate of return on Company Z 16%
Market rate of return 12%
Risk free rate 4%
1. Calculate Company Z’s beta
2. If Company Z’s beta is 2.2, what would be the new required rate of return
Problem 6-5 Portfolio rate of return (Chapter 6)
Suppose you manage a portfolio that consists of the following stocks:
Stock Investment Beta
A  500,000 0.8
B  2,250,000 1.4
C  1,750,000 -0.7
D  1,500,000 1.3
If the market’s required rate of return is 12% and the risk-free rate is 3%, what
is the fund’s required rate of return?
Problem 6-6 Standard deviation (Chapter 6)
Given the following information, calculate the expected return for the portfolio and the standard deviation. SHOW your work.
Probability Returns
0.40 5%
0.30 7%
0.20 12%
0.10 20%
Problem 6-7 Holding period gain (Chapter 6)
Suppose you purchased 40 shares of XYZ stock for SAR 350.00 on February 1.
You sell the 40 shares of stock on October 1 of the same year for 672.40.
No dividends were paid during the year.
1. Calculate the holding period gain
2. Calculate the holding period return


Business & Finance homework help