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[Instruction for Q912 ]. Mr. K created his own portfolio consisting of only firm XYZ (100% weight). He has analyzed the one-year data in 2021,
[Instruction for Q912 ]. Mr. K created his own portfolio consisting of only "firm XYZ" (100\% weight). He has analyzed the one-year data in 2021, and found the followings: Mr. K's portfolio: the average return =2%,SD=30%. The market: the average return =12%,SD=10% Risk-free rate =4% XYZ's beta =2.0. 9. What is the (theoretically) expected return for the XYZ stock? A) 2% B) 12% C) 18% D) 20% 10. What is the (theoretically) reward-to-risk ratio for the XYZ stock? A) 4% B) 8% C) 12% D) We cannot know the answer from the given limited information 11. Mc. K has compared the theoretical expected return and the performance of his portfolio again. Then, he finds that there exists a significant difference between these (even he considers the potential statistical errors). Why is Mr. K's investment so different? A) Mr. K failed to choose an appropriate stock as his only one stock "XYZ" in his portfolio. B) We can say that the stock market was not efficient enough in 2021. C) We can say that Mc. K had a wrong investment strategy, that is, lack of diversification. D) We do not know because we cannot well-predict the short-term stock price movement
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