Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Consider the following stock information about Tencent and HSBC State of economy Probability of State of economy Returns if state occurs Tencent HSBC Bad 0.3
Consider the following stock information about Tencent and HSBC
State of economy | Probability of State of economy | Returns if state occurs | ||
Tencent | HSBC | |||
Bad | 0.3 | -10% | -5% | |
Good | 0.7 | 15% | 12% |
a. Whatre the expected return on each stock? b. Whatre the standard deviation on each stock? c. The risk free rate is 1.5%. Based on the CAPM, If Tencents market beta is 1.5, whats the beta of HSBC? d. If you invested 65 percent in Tencent and 35 percent in HSBC, what is your portfolio expected return? The standard deviation? e. Given the portfolio information in (d) and beta information in (c), what is the portfolios market beta?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started