Question
1. (4 points) You invest 30% of funding in Stock M and the rest in Stock N. The return on Stock M is 12% and
1. (4 points) You invest 30% of funding in Stock M and the rest in Stock N. The return on Stock M is 12% and its standard deviation is 7%. The return on Stock N is 25% with a standard deviation of 11%. Assume the two stocks have a correlation coefficient of 0.3. Calculate this portfolios return and standard deviation.
2. (2 points) If you invest your money in 3 stocks: A, B, C. Each stock has a return of 11%, 15%, and 21%. Your funding allocation on the stocks is: 30:30:40. Calculate your portfolio return.
3. (4 points) Suppose you own a portfolio that has a beta risk of 1.2. Treasury bond yield is assumed to be 5%, and the stock market return on average is 11%. What should be your required return on this portfolio if you use CAPM in your estimation? What is the stock market risk premium? What is your portfolios risk premium?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started