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a) Calculate the expected average rate of return and the standard deviation on each of the two alternatives: Dell and HP, in addition to
a) Calculate the expected average rate of return and the standard deviation on each of the two alternatives: Dell and HP, in addition to the market index. b) Calculate the coefficient of Correlation between Dell and HP. c) Suppose you created a 2-stock portfolio by investing $75,000 in Dell and $25,000 in HP, calculate the expected return, the standard deviation, and the coefficient of variation (CVp) for this portfolio. d) Use the previously calculated standard deviations for Dell, HP and the market in question (a) to estimate Dell's and HP's betas e) If the risk free rate equals 4%, and the expected rate on the market equals 9%, find the required rate of return on Dell and HP. f) Would you purchase Dell and/or HP? Why? g) Suppose you form a portfolio with $1.4 million in Dell and $0.6 million in HP, what is the Required Return on the Portfolio? Year 1 2 3 4 5 6 7 8 9 10 Market 30% 7 18 -22 -14 10 26 -10 -3 38 Dell 26% 15 -14
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