--%>
Assignment Help - homework help

Additive risk in the CAPM

Suppose that the two securities APPL and MSFT account for the entire large cap technology component of the S&P 500 (hypothetically – of course – there are really plenty of others). Further, suppose that their weights in the S&P index were as follows:

1988_capm.jpg

So that, for example, AAPL makes up 3% of the index since its weight is 0.03. [These weights are hypothetical – actual weights are computed based on the current market capitalization of each company included in the index, so they change all the time]

a. What fraction of the total portfolio is this large cap technology sector?
b. What is the beta of this large cap technology sector?
c. If the S&P 500 is the market portfolio, what is its beta?
d. What is the beta of the remaining stocks in the S&P (consider these as a single sector)?

   Related Questions in Corporate Finance

  • Q : Market for Corporate Bonds Write some

    Write some point regarding Market for Corporate Bonds.

    		•
  • Q : What is the Capital Cash Flow What is

    What is the Capital Cash Flow?

    		•
  • Q : Illustrates financial consultant has

    A financial consultant obtains various valuations of my company when this discounts the Free Cash Flow (FCF) as opposed to when this uses the Equity Cash Flow. Is it correct?

    		•
  • Q : An example of use beta of Kinepolis in

    A financial consultant is valuing the company I set as an objective (an entertainment centre) by discounting the cash flows until the end of the dealership at 7.26% (interest rate on 30-year-bonds = 5.1%; market premium = 5%, and Beta = 0.47%). 0.47 is a beta provided

    		•
  • Q : Relationship between flow to

    Is there any relationship in between the flow to shareholders and the net income?

    		•
  • Q : Efficiency Ratios Efficiency Ratios :

    Efficiency Ratios: These ratios comprise Receivables Turnover, Inventory Turnover, Asset Turnover and Net Working Capital Turnover ratios. Efficiency ratios show the utilization of Assets of the company thus as to generate Revenue that is, the best ut

    		•
  • Q : Problem on EBIT ABC Corporation stock

    ABC Corporation stock sells at $27 per share and its dividend per share is $1.20. ABC has price-earnings ratio of 16. The company contains $40 million worth of bonds, selling at par, with 8.5% coupon. The EBIT of ABC is of $12 million and its tax rate is 30%. Calculat

    		•
  • Q : Strategy of Bull Spread State when

    State when market is expected to go up then what is the Strategy of Bull Spread?

    		•
  • Q : Leverage ratio problem Handy Inc has

    Handy Inc has debt-to-assets ratio of 40%, tax rate of 35%, and total value of $100 million. W. C. Handy, the CFO, would like to increase the leverage ratio to 42%, and he believes that there will be no change in the bankruptcy cost of the company. How many dollars wo

    		•
  • Q : Broad research methodologies Various

    Various broad research methodologies are available with which to study the development of accounting theory. a. Discuss the deductive, inductive, normative, and empirical research methods.