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Arif Amsyar is a financial advisor who manages money for high-net-worth individuals. For a particular client, Arif recommends the following selection of stocks: a) Find
Arif Amsyar is a financial advisor who manages money for high-net-worth individuals. For a particular client, Arif recommends the following selection of stocks: a) Find the expected return and standard deviation for each stock. (7 marks) b) Find the covariance and correlation coefficient between stock X and stock Y. (3 marks) c) If Arif recommends his client to invest 60% of funds in stock X and 40% in stock Y, determine the return and risk for the portfolio. (5 marks) d) Stock X has a beta of 1.2 and stock Y has a beta of 0.8. If the required market return is 12% and the risk-free rate is 5%, show how much does the required return on the riskier stock exceed the required return on the less risky stock
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