Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

pleass answer if you sure other wise skip it 4. Based on the following information Calculate State of Economy Probability of State of Economy Rate

pleass answer if you sure other wise skip it

image text in transcribed

4. Based on the following information Calculate State of Economy Probability of State of Economy Rate of Return if State Occurs Stock A Stock B 0.20 0.05 -0.17 Recession Normal Boom 0.08 0.12 0.55 0.25 0.13 0.29 a) The expected return of Stock A b) The expected return of Stock B c) The expected return of Portfolio where you invest $35,000 in Stock A and $45,000 in Stock B d) Suppose Stock A has a beta of 0.8 and Stock B has a beta of 1.3. If you invest $35,000 in Stock A and $45,000 in Stock B, what is the beta of this portfolio? e) Expected return on the market (Rus) is 10% and the risk-free (r) is 4%. What must the the expected return on the portfolio according to CAPM? (Use the beta you have calculated in section d) for CAPM)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investing In Cryptocurrency Learn About Cryptocurrencies And Their Uses

Authors: Federico Unvarsky

1st Edition

979-8353779117

More Books

Students also viewed these Finance questions