Question
1. Compare the stand-alone risk/expected return of each of the four investments and the S&P 500 listed in Exhibit 12.1. 2. MSI is considering two
1. Compare the stand-alone risk/expected return of each of the four investments and the S&P 500 listed in Exhibit 12.1.
2. MSI is considering two investment strategies: a. 50 percent in Healthcare Fund and 50 percent in Inverse ETF b. 50 percent in Healthcare Fund and 50 percent in Biotech Fund Compare the risk of the two portfolios. Why does the risk differ? 3a. Is the return on the one-year T-bill risk free? 3b. Suppose MSI wants to construct a portfolio of stocks that has an expected return equal to the risk-free rate. Is such a portfolio possible? Is such a portfolio likely? 3c. Suppose that you choose to hold a single stock investment in isolation. Would you be compensated for all of the risk that you assume? Explain.
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