a) The expected return of Stock A b) The expected return of Stock B c) The expected return of Portfolio where you invest $15,000 in Stock A and $25,000 in Stock B
Based on the following information Calculate
|
State of Economy |
Probability of State of Economy |
|
|
|
Stock A |
Stock B |
||
|
Recession |
0.25 |
0.05 |
-0.17 |
|
Normal |
0.45 |
0.08 |
0.12 |
|
Boom |
0.30 |
0.13 |
0.29 |
a) The expected return of Stock A
b) The expected return of Stock B
c) The expected return of Portfolio where you invest $15,000 in Stock A and $25,000 in Stock B
d) Suppose Stock A has a beta of 0.8 and Stock B has a beta of 1.2. If you invest $15,000 in Stock A and $25,000 in Stock B, what is the beta of this portfolio?
e) Expected return on the market (RM ) is 12% and the risk-free (rf) is 3%. What must the expected return on the portfolio according to
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