Is the following distribution symmetrical? Calculate the covariance. Calculate the variance of the portfolio made up of 30% X and 70% of the Market. Find the Beta for the firm. Find the correlation coefficient. What does the beta measure?

Assuming the beta calculated above, and assuming E(RM) = 12%; Rf= 8% Find the price of a stock that paid a dividend of $3.00. Assume that the stock will grow at 4% for the next 5-years. Thereafter the growth rate is expected to be a negative 3%.

 

State of Probability Security the world Returns X Boom .30 Normal .40 Recession .30 .25 .07 .03 E(RX).112 = .008436 Security Returns Market .15 .10 .05 E(RMkt).10 = .0015