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Clear explanations please, thanks. Use the following information for problems 3 through 8: The risk-free rate of return is 4%, the required rate of return
Clear explanations please, thanks.
Use the following information for problems 3 through 8: The risk-free rate of return is 4%, the required rate of return of the market portfolio is 10%. You invest $10,000 in stock A, $15,000 in stock B, $50,000 in stock C, and $50,000 in stock D. The average returns and standard deviations of the individual stocks are as follows Stock A Stock B Stock C Stock D 0.25 0.16 0.04 0.02 Ret Standard Dev 0.31 0.36 0.17 0.08 Beta 2.0 1.0 0.8 0.3 Problem 3: What is the average rate of return of the portfolio consisting of these four stocks? Problem 4: Which stock has the highest amount of stand-alone risk? Problem 5: What is the beta of your portfolio? Problem 6: Which stock has the highest amount of systematic risk? Problem 7: What is the required rate of return of the portfolio? Problem 8: Assume that you invest another $150,000 in a fifth stock. Stock E has an average rate of return of 0.18, a standard deviation of returns of 0.22, and a beta of 1.8. What is the new portfolio's beta? Problem 9: What is the equilibrium expected rate of return of the new portfolio? Problem 10: What is the required rate of return of Stock EStep by Step Solution
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