Question
Stock Investment Standard deviation Expected Rate of Return Correlation Coefficient A B M A 70% 10% 20% 1 0.04 0.8 B 30% 8% 10% 1
| Stock | Investment | Standard deviation | Expected Rate of Return | Correlation Coefficient | ||
| A | B | M | ||||
| A | 70% | 10% | 20% | 1 | 0.04 | 0.8 |
| B | 30% | 8% | 10% | 1 | 0.5 | |
| Market Portfolio | 4% | 13% | 1 | |||
| Risk-free investment | 0% | 5% | ||||
Use the above table to answer the following questions:
- Compute the market risk premium
- Compute the required Rate of Return for stock A.
- Compute the required Rate of Return for stock B.
- Compute the required Rate of Return for the portfolio.
- Compute the risk for a portfolio contains stock A and stock B.
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Ethics In Finance
Authors: John R. Boatright
3rd Edition
1118615824, 978-1118615829
