#14-15

14. What is the expected return on stock JAD?

15. What is the standard deviation on stock IRO?

10. Beta is the measure Page 1 of a unsystematic risk c. default risk b. systematic risk d. firm-specific risk r, efficient risk -11. Diversification reduces the risk in a _ a. unsystematic risk. c default risk b systematic risk. d. non-tir specific risb e efficient risk T2. The Security Market Line (SML) extends from the a. risk freu rate and goes through the minimum-tisk portfolio b. risk-fve rate and is tangent to the ctficient frontier c. market porttolio and is tangent to the efficient frontie d. market portlolio to the minimum-risk purtolio e. risk-free rate and goes througlh the market portoli ULA S 13. A portfolio is considered to be efticient if: PR ( a. no other portfolio offers higher expected return for the satrie risk. h. no other partfalio ofters lower risk for the sane expected returm c there is no portolu with higher expected return d. both a, and b. e all of the above niurn) Use the following informalion ahoul two prospective stocks tor ihe rext three questioxs. YOU MUST SHOW YOUR WORK. Probability Returrn R turn 13% 10% 3% -6%| 27% Great Company IPCo Guod Company IPO Mediocre Company IPO Poor Company IPO .25 30 .30 15 15% 15% 9.3% Expected Return Standard Deviation 6.98%, 14 What is the expected return on stock JAD? 15, What is the standard deviation on stock IRO? (416) Now suppose you decide to purchase both stocks as a portfolio. You have s8000 to invest. If the correlation coefticient between the two stocks is -0.1, calculate the expected return and standard deviation of the following portolio Expected Standard Amount invested TRO $4800 JAD $3200