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You are trying to analyze two different stocks if the risk- free is 4.75%: i. ii. iii. iv. V. PROBABILITY 0.5 0.3 0.2 STOCKS1 14%
You are trying to analyze two different stocks if the risk- free is 4.75%: i. ii. iii. iv. V. PROBABILITY 0.5 0.3 0.2 STOCKS1 14% 10% 0% a. Compute the expected return for each investment. 10%, 16% 7%, -1% 8%, 11.25 6%, 26% None of the above iv. V. STOCK2 -2% 30% 40% b. Compute the standard deviation for each investment i. 8.78%, 26.25% ii. 3.83%, 11.50% iii. 6.26%, 18.37% 0.39%, 3.38% None of the above c. Which investment is better based on the risk/return relationship? Stock 1 Stock 2 Both of them are good None of the above i. ii. iii. iv. d. What would be the expected return of a portfolio that consists of 70 percent of stock1 and 30 percent of stock2? i. ii. iii. iv. V. 16.00% 22.95% 11.80% 37.20% None of the above e. What would be the risk premium of both stocks for the new weights? i. 19.25%, 63.25% ii. 11.50%, 13.62% iii. 2.25, 7.05% iv. 5.25%, 11.25% v. None of the above
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