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The market expected return is 10%, and the risk-free rate is 3%. Consider the following information about three stocks: a. How to allocate the investments
The market expected return is 10%, and the risk-free rate is 3%. Consider the following information about three stocks: a. How to allocate the investments between stock A and B so that the portfolio return is expected to be 9.75% ? (4 marks) b. How to measure the systematic risk of individual stocks? What's the measure for stock A? (4 marks) c. How to measure the total risk of individual stocks? What's the measure for stock A? (4 marks) d. If your portfolio is invested 60 percent in A and 40 percent in B, what is the portfolio expected return? The standard deviation? ( 7 marks)
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