Question
2. (a) Calculate the alphas of the following stocks. The expected return to the market portfolio is 15% and the risk-free rate is 5%. Alpha
2. (a) Calculate the alphas of the following stocks. The expected return to the market portfolio is 15% and the risk-free rate is 5%. Alpha = expected return - required return.
| Stock | Beta | Expected return |
| V | 0.60 | 10% |
| W | 0.70 | 13% |
| X | 0.80 | 14% |
| Y | 1.10 | 15% |
| Z | 1.50 | 20% |
(b) Which of the stocks above, if any, do you recommend for investment? Explain your answer.
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Finance In America An Unfinished Story
Authors: Kevin R. Brine, Mary Poovey
1st Edition
022650204X, 978-0226502045
