The variance of Bobsled Inc. is 2.5 and the variance of Luge Inc. is 1.6, in a market with a variance of 0.82 and an expected return of 6%. The covariance of Bobsled with the market is 0.984. The covariance of Bobsled with Luge is 0.4 and the correlation coefficient between Bobsled and Luge is 0.2. The risk-free rate (Rf) is 4%. Bobsled Incs stock price closes a $65 on December 2, 2021 and at $68 on December 3, 2021. Use CAPM [E(Ri) = Rf + E(Rm-Rf)].

What is the equilibrium price of Bobsled stock?

Would you invest in Bobsleds stock? Why or why not?

In a portfolio with 30% Bobsled and 70% Luge, what return on Luge would you require to get the same return as the market?

What is the variance of the portfolio in c) above?

The variance of Bobsled Inc. is 2.5 and the variance of Luge Inc. is 1.6, in a market with a variance of 0.82 and an expected return of 6%. The covariance of Bobsled with the market is 0.984. The covariance of Bobsled with Luge is 0.4 and the correlation coefficient between Bobsled and Luge is 0.2. The risk-free rate (Rf) is 4%. Bobsled Incs stock price closes a $65 on December 2, 2021, and at $68 on December 3, 2021. Use CAPM [E(Ri) = Rf + E(Rm-Rf)].

What is the equilibrium price of Bobsled stock?

Would you invest in Bobsleds stock? Why or why not?

In a portfolio with 30% Bobsled and 70% Luge, what return on Luge would you require to get the same return as the market?

What is the variance of the portfolio in c) above?