Ijus number 4

FINA3311 PRINCIPLES OF FINANCE PRACTICE QUESTIONS 4: Dr. Alya Mubarak Al Fori-Department of Economics and Finance Chapter 13: Risk, Return and the Security Market Line 1. Consider the following information: a. What is the expected return on stock A ? b. What is the expected return on stock B? c. What is the standard deviation of stock A ? d. What is the standard deviation of stock B? e. What is the expected return on a portfolio of A and B that has 20% invested in A ? f. What is the standard deviation of a portfolio of A and B that has 20% invested in A? 2. Suppose the risk free rate is 4%, the market risk premium is 8.6% and beta ( ) of stock J is 1.3. Based on CAPM, what is the expected return on stock J ? 3. If the risk free rate is 5%, the expected return on the market is 12% and the expected return on security S is 17%, then what is the beta of security S ? 4. What is the return and beta of the following portfolio of securities listed blow