Question
Which of the following stocks represent a buying opportunity in combination with an already well diversified portfolio ? Show your calculation. Stock W: Beta =
Which of the following stocks represent a buying opportunity in combination with an already well diversified portfolio ? Show your calculation. Stock W: Beta = 2.0; risk-free rate = 2 percent; market rate of return = 14 percent; and expected rate of return on the stock = 30 percent. Stock X. Beta = 0.5; risk-free rate = 4 percent; market rate of return = 12 percent; and expected rate of return on the stock = 10 percent. Stock Y: Beta = 0.9; risk-free rate = 4 percent; market rate of return = 12 percent; and expected rate of return on the stock = 13 percent. Stock Z: Beta = 1.5; risk-free rate = 4 percent; market rate of return = 12 percent; and expected rate of return on the stock = 15 percent.
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