Beta Calculations

Michael Margolis is a single parent and motivational training consultant from Palatine, Illinois. He is wondering about potential returns on investments given certain amounts of risk. Michael invested a total of $12,000 in three stocks ($4,000 in each) with different betas: stock A with a beta of 0.7, stock B with a beta of 1.8, and stock C with a beta of 2.5. If the stock market rises 8 percent over the next year, what will be the likely value of each investment? Do not round your intermediate calculations. Round your answers to the nearest dollar.

Stock A Stock B Stock C Likely value

A: B: C:

The answer is NOT a:26400 b:62600 c:84000

If the stock market declines 9 percent over the next year, what will be the likely value of each of Michaels investments? Do not round your intermediate calculations. Round your answers to the nearest dollar.

Stock A Stock B Stock C Likely value

A: B: C:

The answer is not a: 21200 b: 60800 c: 86000