Question
Consider the following investment options along with the designated probability distribution of returns for each: (6 marks) Economic state Probability of occurrence T-Bill Stock A
Consider the following investment options along with the designated probability distribution of returns for each: (6 marks) Economic state Probability of occurrence T-Bill Stock A Stock B Very poor 0.1 5.5% (15)% 30% Poor 0.2 5.5% 5% 20% Average 0.4 5.5% 17% 10% Good 0.2 5.5% 20% 0% Very good 0.1 5.5% 35% (10)% The expected return of stock B is 10% and beta of stock B is 0.8. Market risk premium is 6%. a) What's the required rate of return of stock A, if market is premium is 6% and the stock has a beta of 1.3? b) What's the standard deviation of stock A? c) Construct an equal investment portfolio of stock A and stock B and calculate the portfolio's standard deviation.d) What is the portfolio's required rate of return
Kindly mention calculator keys if applicable
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