Question
Stock Expected Return Beta Firm-specific standard deviation A 13% 0.8 30% B 18% 1.2 40% market = 22%; Risk-free rate = 8% a. Using data
| Stock | Expected Return | Beta | Firm-specific standard deviation |
| A | 13% | 0.8 | 30% |
| B | 18% | 1.2 | 40% |
| market = 22%; Risk-free rate = 8% | |||
a. Using data from the above table, determine the standard deviations of Stocks A and B.
b. Determine your expected return and portfolio beta if you combine the stocks and the risk free asset in the following weights: wRF = 0.25; wA = 0.30; wB = 0.45.
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Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, William J. Kretlow
11th Edition
0324653506, 978-0324653502
