You have $100,000 invested in this portfolio. $55,000 is invested in IBM: Probability of State of Economy IBM TWTR Recession Normal 0.15 0.05 -0.17 0.65 0.20 0.08 0.13 0.12 Boom 0.29 What is the expected return and standard deviation of each stock? What is the portfolio expected return and standard deviation? You are considering adding another stock, DNKN, with a beta of 1.3 to the portfolio. The market risk premium is 8% and the risk-free rate is 2.5%. What is the expected return of this asset? You decide to open a separate account at another brokerage firm. Your goal is to have a portfolio beta of 1.12. The portfolio consists of 20% U.S. Treasury bills, 50% stock A, and 30% stock B. Stock A has a risk- level equivalent to that of the overall market. What is the beta of stock B? Please interpret what this beta measure represents relative to the beta of the market. What is the difference between systematic and unsystematic risk? Be sure to mention which is diversifiable risk and non-diversifiable risk.
You have $100,000 invested in this portfolio. $55,000 is invested in IBM: Probability of State of Economy IBM TWTR Recession Normal 0.15 0.05 -0.17 0.65 0.20 0.08 0.13 0.12 Boom 0.29 What is the expected return and standard deviation of each stock? What is the portfolio expected return and standard deviation? You are considering adding another stock, DNKN, with a beta of 1.3 to the portfolio. The market risk premium is 8% and the risk-free rate is 2.5%. What is the expected return of this asset? You decide to open a separate account at another brokerage firm. Your goal is to have a portfolio beta of 1.12. The portfolio consists of 20% U.S. Treasury bills, 50% stock A, and 30% stock B. Stock A has a risk- level equivalent to that of the overall market. What is the beta of stock B? Please interpret what this beta measure represents relative to the beta of the market. What is the difference between systematic and unsystematic risk? Be sure to mention which is diversifiable risk and non-diversifiable risk.
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
Section: Chapter Questions
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Transcribed Image Text:1. You have $100,000 invested in this portfolio. $55,000 is invested in IBM:
Probability of State of Economy
0.15
IBM
0.05
TWTR
-0.17
Recession
Normal
0.65
0.08
0.12
Вoom
0.20
0.13
0.29
What is the expected return and standard deviation of each stock?
What is the portfolio expected return and standard deviation?
You are considering adding another stock, DNKN, with a beta of 1.3 to the portfolio. The market risk
premium is 8% and the risk-free rate is 2.5%. What is the expected return of this asset?
You decide to open a separate account at another brokerage firm. Your goal is to have a portfolio beta of
1.12. The portfolio consists of 20% U.S. Treasury bills, 50% stock A, and 30% stock B. Stock A has a risk-
level equivalent to that of the overall market. What is the beta of stock B? Please interpret what this beta
measure represents relative to the beta of the market.
What is the difference between systematic and unsystematic risk? Be sure to mention which is diversifiable
risk and non-diversifiable risk.
а.
b.
d.
е.
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