Question
You are given the following information about Stocks A and B: Rate of Return if State Occurs State of Economy Probability of State of Economy
You are given the following information about Stocks A and B:
|
|
| Rate of Return if State Occurs | |
| State of Economy | Probability of State of Economy | Stock A | Stock B |
| Boom | 0.30 | 22% | 17% |
| Normal | 0.50 | 16% | 7% |
| Recession | 0.20 | -3% | 2% |
Stock A has a beta of 1.5 and Stock B has a beta of 1.2.
- What is the beta of a portfolio consisting of 60% of Stock A and 40% of Stock B?
- What is the expected return of a portfolio consisting of 60% of Stock A and 40% of Stock B?
- Which stock has a greater return variance?
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Financial Management Principles And Applications
Authors: Sheridan Titman, John Martin
14th Global Edition
1292349824, 978-1292349824
