--%>
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 : Finc . A&B Enterprises is trying to

    . A&B Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $100,000. Their cash flows follow: Year A B C D 1 $10,000 $50,000 $25,000 $ 0 2 20,000 40,000 25,000 0 3 30,000 30,000 25,000 45,0

    		•
  • Q : Explain valuation method for

    We were assigned a valuation of a pharmaceutical laboratory’ shares. Which valuation method is further convenient?

    		•
  • Q : Financial statements The concept of

    The concept of conservatism has been influential in the development of accounting theory and practice.  A major effect of conservatism is that accountants tend to recognize losses but not gains.  For example, when the value of an asset is impaired, it is wri

    		•
  • Q : Determine the future value What would

    What would the future value after 5 years of $100 be at 10% compound interest?

    		•
  • Q : Explain deducing yield curve model

    Explain deducing yield curve model of HJM.

    		•
  • Q : Did you see Vueling case Did you notice

    Did you notice the Vueling case? How is this possible that an investment bank sets the objective price of its shares in €2.50 per share upon the 2nd of October, 2007, just after replacing Vueling shares at €31 per share in J

    		•
  • Q : Define stock variable Stock variable :

    Stock variable: It is a variable whose value is measured or evaluated at a point of time.

    		•
  • Q : Earnings management What do you mean by

    What do you mean by Earnings management and what are their actions and activities?

    		•
  • Q : Operational efficiency and

    Distinguish between Operational efficiency and informational efficiency?

    		•
  • Q : Problem about commercial and fiscal

    A court assigned to me (as an auditor and economist) a valuation of a market butcher’s. The butcher’s did not give any simple income statements or any valuable information that I could use in my valuation. This is a small business with just two workers, th

    		•