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A small market consists of three stocks, A, B, and C., and their financial data and projection are presented below. Assume CAPM holds.  Stock Number of shares Stock Price Beta A 750 33 1.2 B 220 51 0.8 C 450 19 1.4   Economic condition Probability A B C Boom 20% 20% 22% 23% Normal 50% 15% 10% 12% Recession 30% 2% 5% 7%   Find: a)  the expected return and standard deviation on this portfolio.  b)  the expected return on the market using portfolio beta if Rf=5%.

A small market consists of three stocks, A, B, and C., and their financial data and projection are presented below. Assume CAPM holds.  Stock Number of shares Stock Price Beta A 750 33 1.2 B 220 51 0.8 C 450 19 1.4   Economic condition Probability A B C Boom 20% 20% 22% 23% Normal 50% 15% 10% 12% Recession 30% 2% 5% 7%   Find: a)  the expected return and standard deviation on this portfolio.  b)  the expected return on the market using portfolio beta if Rf=5%.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A small market consists of three stocks, A, B, and C., and their financial data and projection are presented below. Assume CAPM holds. 

Stock

Number of shares

Stock Price

Beta
A

750

33

1.2
B

220

 51 0.8
C 450 19

1.4

 

Economic condition

Probability

 A B C

Boom

20%

20%

22%

 23%

Normal

 50% 15% 10% 12%

Recession

 30% 2% 5% 7%

 

Find:

a)  the expected return and standard deviation on this portfolio. 

b)  the expected return on the market using portfolio beta if Rf=5%. 

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