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Q2) There is a 29.60% probability of an average economy and a 70.40% probability of an above average economy. You invest 21.70% of your money
Q2) There is a 29.60% probability of an average economy and a 70.40% probability of an above average economy. You invest 21.70% of your money in Stock S and 78.30% of your money in Stock T. In an average economy the expected returns for Stock S and Stock T are 11.70% and 8.80%, respectively. In an above average economy the the expected returns for Stock S and T are 30.30% and 31.50%, respectively. What is the expected return for this two stock portfolio? (2 points) Q3) You are invested 29.60% in growth stocks with a beta of 1.85, 24.40% in value stocks with a beta of 1.23, and 46.00% in the market portfolio. What is the beta of your portfolio? (1 point) For the final answers, round your answer to the nearest 4 decimal places (3 decimals for the reward-to-risk ratio and 2 for the beta-coefficient). If you need to use a calculated number for further calculations, DO NOT round until after all calculations have been completed. Q4) An analyst gathered the following information for a stock and market parameters: stock beta = 1.48; expected return on the Market = 10.80%; expected return on T-bills = 2.30%; current stock Price = $8.19; expected stock price in one year = $8.01; expected dividend payment next year = $2.19. Calculate the a) Required return for this stock (1 point): b) Expected return for this stock (1 point): Q5) The market risk premium for next period is 9.80% and the risk-free rate is 3.60%. Stock Z has a beta of 0.77 and an expected return of 12.50%. What is the a) Market's reward-to-risk ratio? (1 point): bl Stock 7's reward-to-risk ratio 11 point
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