Suppose you owned a portfolio consisting of $250,000 of long-term U.S. government bonds. Would your portfolio be riskless? Explain. What is the least risky security you can think of? Explain. Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a correlation coefficient with the market of −0.3, and a beta coefficient of −0.5. Stock B has an expected return of 12%, a standard deviation of returns of 10%, a 0.7 correlation with the market, and a beta coefficient of 1.0. Which security is riskier? Why?
Suppose you owned a portfolio consisting of $250,000 of long-term U.S. government bonds. Would your portfolio be riskless? Explain. What is the least risky security you can think of? Explain. Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a correlation coefficient with the market of −0.3, and a beta coefficient of −0.5. Stock B has an expected return of 12%, a standard deviation of returns of 10%, a 0.7 correlation with the market, and a beta coefficient of 1.0. Which security is riskier? Why?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 3Q: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation...
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Suppose you owned a portfolio consisting of $250,000 of long-term U.S. government bonds. Would your portfolio be riskless? Explain. What is the least risky security you can think of? Explain. Stock A has an expected return of 7%, a standard deviation of expected returns of 35%, a correlation coefficient with the market of −0.3, and a beta coefficient of −0.5. Stock B has an expected return of 12%, a standard deviation of returns of 10%, a 0.7 correlation with the market, and a beta coefficient of 1.0. Which security is riskier? Why?
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