question 7-8

e of Return a. Calculate Stock A's beta. b. If Stock A's beta were 2.0, what would be A's new re uired rate of return? 7-7 The following table shows the annual returns over time for two stocks d Rate of R and Risk Probability 0.10 0.20 0.40 0.20 0.10 3% -10% 12 16 24 17 Calculate each stock's expected return, standard deviation, and coefficient of variation. 7-8 Based on the information in Problem 7-7 if a portfolio is made up of 40% of stock A and 60% Rate of stock B: cted and Risk Calculate the portfolio's expected rate of return. a. b. C alculate the portfolio's standard deviation. Assume the correlation between the two stocks is 0.40 7.9) Suppose rRF-9%, rM-14%, and bi 1.3 Raro a. What is ri, the required rate of return on Stock i? b. Now suppose rRF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this affect rw and r? Now assume rRF remains at 9% but rM (1) increases to 16% or (2) falls to 13%. The slope c